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Part 8. Appeals

Chapter 17. Settlement Computations and Statutory Notices of Deficiency

Section 2. General Settlement and Rule 155 Computations

8.17.2  General Settlement and Rule 155 Computations

8.17.2.1  (11-09-2007)
Introduction to IRM Section 8.17.2

  1. This section covers procedures for preparing settlement computations (aka audit statements) on cases worked in Appeals. Many procedures are the same on every case regardless of the type tax involved. This section covers the common procedures.

  2. Some cases also require special procedures unique to the type of tax or case involved. These special procedures are covered in separate sections. The following is a list of the cases and the IRM subsection where the special procedures are located:

    • Appeals Employment Tax Cases - IRM 4.23.16;

    • Appeals Docketed Cases - IRM 8.4.1;

    • Appeals Estate and Gift Cases - IRM 8.7.4;

    • Transferee and Transferor Liabilities - IRM 8.7.5;

    • Bankruptcy Cases - IRM 8.7.6;

    • Claims and Overassessment Cases - IRM 8.7.7;

    • Tax Exempt and Governmental Entities (TE/GE) - IRM 8.7.8;

    • Joint Committee Case Procedures - IRM 8.7.9;

    • Appeals Team Cases - IRM 8.7.11;

    • Special Formats - IRM 8.17.5;

    • Interest Issues - IRM 8.17.6;

    • Penalties - IRM 8.17.7;

    • TEFRA Cases - IRM 8.19.6.7;

    • Innocent Spouse Cases - IRM 25.15.12.

8.17.2.2  (11-09-2007)
What is a Settlement Computation

  1. Settlement computations generally contain the following four parts:

    • face or summary sheet;

    • adjustment schedule;

    • computation of tax schedule (generally the lower part of adjustment schedule); and

    • explanation of adjustments schedules (including supplemental schedules and exhibits).

  2. A settlement computation is an important part of Appeals' determination and disposition of a case. It must be mathematically and technically accurate, and include clear explanations and schedules for the following reasons:

    1. It is a source document for tax amounts on agreement forms, Form 5402 (Appeals Transmittal and Case Memo), and Form 5403 (Appeals Closing Record);

    2. It informs the taxpayer of adjustments resulting from Appeals' disposition of the case; and

    3. It serves as a guide for subsequent years adjustments.

8.17.2.3  (11-09-2007)
Settlement Computations - When Not Required

  1. There are certain instances when no settlement computation is necessary. The following list those situations:

    1. Complete reversal of the protested deficiency (additional or delinquent taxes) or overassessment and recomputation would result in no deficiency (additional or delinquent taxes) or overassessment.

    2. Findings of the Compliance Area or Field Operations Directors are sustained in full by Appeals.

    3. Split-issue settlement determination of the tax liability not expressed in terms of dollar adjustments to taxable income, credits, etc. Often, however, a computation is necessary to establish a starting point for future actions, such as carrybacks, carryovers, relief provisions, adjusted gross income, and taxable income adjustments, etc.

    4. Commissioner’s determination in the notice of deficiency is agreed in full either during the 90-day period or after filing a petition.

    5. Generally, unagreed docketed cases.

      Note:

      However, if the Appeals Officer raises a new issue or concedes an issue in an unagreed docketed case, an information statement or an settlement computation might be necessary or desired.

    6. Cases where only issues involve exempt status, private foundation classification, or employee plan qualification questions.

8.17.2.4  (11-09-2007)
Separate Settlement Computations Required in Certain Cases

  1. Prepare one settlement computation if taxes are reported on the same tax form by the same taxpayer. However to determine when separate settlement computations are needed, follow these guidelines:

    1. Generally if the cases involve similar type returns, prepare one settlement computation to cover all cases.

    2. If there are years involving both joint and separate returns, prepare an settlement computation for joint return years and an settlement computation for separate return years.

    3. If there are years involving both consolidated corporate and non-consolidated corporate return years, prepare a settlement computation for the consolidated corporate return years and an settlement computation for the non-consolidated corporate return years.

  2. Generally, taxes reportable on the same tax form number by the same taxpayer may be included in one settlement computation.

  3. Additionally, apply the following restrictions when determining if separate settlement computations are required:

    1. Do not combine Fiduciary returns, Form 1041, with individual returns, Form 1040, in the settlement computation.

    2. Do not combine Form 1120 (U.S. Corporation Income Tax Return) years with the taxpayer’s Form 1120-S (U.S. Small Business Corporation Income Tax Return), unless the Form 1120-S is being converted to Form 1120.

    3. Treat Forms 1120-S as cases only when additional tax is due ( IRC 1378) or an overassessment is determined.

8.17.2.5  (11-09-2007)
Preliminary Review Before Preparing Settlement Computations

  1. Prior to preparing the settlement computation, a preliminary review of the case file is needed. Listed below are recommended checks.

    Preliminary Review
    Items to Review Look for:
    a. Returns and Claims Check for original returns and claims for refund, if any, for the protested years and initiate request for any necessary return not with the file. Use command ESTAB to electronically request original returns. See IRM 8.2.1, Requirement for Original Return, for instances where original returns are not necessary.
    b. Statutory Period of Limitations and Claims Filed Date Note statutory period of limitations and claims filed date.
    c. Power of Attorney Check for power of attorney in non-docketed case.
    d. Change of Address, Name Note change of address, name, marital status, etc.
    e. Special Handling Features Note any features in the case requiring special handling. See IRM 8.20, Appeals Processing Manual.
    f. Credit Verification Check for verification of State Death Tax Credit (estate tax) or other credits, if necessary.
    g. Prior Assessments (Overassessments) Inspect returns and review current transcripts to check for evidence of prior adjustments to tax liability, such as mathematical corrections, tentative allowances, or audit adjustments. See IRM 8.20.2.1, IDRS Transcripts of Account.
    h. Return Filed Dates Check filing dates of returns. If timely filed, a receiving date generally will not be shown. If delinquent, the date received should be stamped on the face of the return. Also, check the postmark date on the mailing envelope attached to the back of the delinquent return.
    i. Advance Payments Check for advance payment, usually indicated by Part 2 of Form 3244-A, Payment Posting Voucher, attached to face of return.
    j. Transcript of Account Secure current transcript of account. See IRM 8.20.2.1, IDRS Transcripts of Account.
    k. Protest or Petition Check protest or petition for information or clarification. Issues protested or petitioned are the Appeals Officer’s responsibility, and, generally, it is not necessary for the Tax Computation Specialist to analyze in detail the protest or petition.

  2. A current transcript must be secured from Master File and/or Non-Master File. See IRM 8.20.2.1, IDRS Transcripts of Account.

  3. Read the Request for Audit Work (generally Form 3608) carefully and note the items checked.

    1. If instructions are unclear or are incomplete, make a note of the questionable items.

    2. If an answer is not found during examination of case file, ask the requester to complete or clarify the request.

    3. Consider the effect of proposed adjustments on other items (so-called automatic adjustments).

  4. If providing technical assistance on prior findings is warranted, it generally can be incorporated in the technical work requested by the Appeals Officer, rather than being performed as a separate step. A technique for proving prior findings and revised findings is to prove the deficiency by computing tax at effective rates on income adjustments, taking into account changes in credits.

  5. Bring adjustments improperly handled or omitted in the examination report or notice of deficiency, including those that are automatic or mathematical in nature, to the attention of the Appeals Officer where warranted. See Policies of the Internal Revenue Service, IRM 1.2.1.8.6, P-8-2 (formerly P-8-49) and IRM 8.6.1.5, Raising New Issues and Reopening Closed Issues by Appeals.

8.17.2.6  (11-09-2007)
General Rules for Preparing Settlement Computations

  1. The Internal Revenue Service Code, Regulations, Rulings, Tax Rate Tables and the tax return forms are excellent guides when applying the law in effect for tax credits, tax rates and other computations affecting tax liability. Often it is necessary to modify tax computation forms or create schedules to support tax computations. Following are general rules for computing all taxes.

    1. Compute tax at rates in effect for taxable year, period, etc.

    2. Recompute, if necessary, other taxes and credits. If there is no change from prior determination or return, make appropriate notation. For example: "General business credit per return."

    3. Reference basic computation form to any supporting computations, e.g., "Tax from Schedule 9."

    4. If liability per return was adjusted, show computation of "Tax as previously adjusted" similar to the following:

      Return as filed $40,000.00
      Additional assessment (Date) 2,000.00
      Overassessment (Date) (1,000.00)
      Tentative allowance carryback from (Year) (Date) (5,000.00)
      Tax as previously adjusted $36,000.00
      =========
         
      Show this at the bottom of the tax computation form or on an attachment.

    5. Both Form 5278 and Form 4549 have lines designated for the entry of additions to tax and/or penalties. When annotating the information on either of these forms or on a tax computation form generated from the computer software, use the following format:

      additions to tax/penalties:  
      Section 6651(a)(1) $ 500.00
      Section 6662(a) 2,000.00

  2. Tax reference charts for both individual and corporate income tax are found on the Appeals Tax Computation Specialists web site.

8.17.2.7  (11-09-2007)
Forms Commonly Used in Settlement Computations

  1. Many of the forms used in preparing settlement computations are available in different formats including computer generated or fillable Adobe Acrobat, Word, and Excel. They can be generated through the RGS or BNA software, and accessed on the Appeals Tax Computation Specialist web site and on the Electronic Publishing web site.

  2. The following forms are commonly used in settlement computations:

    • Form 5278, Statement - Income Tax Changes

    • Form 4549, Income Tax Examination Changes

    • Form 4549-A, Income Tax Discrepancy Adjustments

    • Form 4549-EZ, Income Tax Examination Changes

  3. See IRM Exhibit 8.17.2-1 for all forms used in preparing settlement computations.

8.17.2.7.1  (11-09-2007)
Forms Used in Individual Income Tax Computations

  1. The following table describes the available forms, sources and formats for preparing settlement computations on individual income tax cases:

      Form 5278 Form 4549 Form 4549-A (see note) Form 4549-EZ (see note)
    RGS software - (Adobe Acrobat) X X X X
    BNA software - (Adobe Acrobat) X X X  
    ACDS APGolf - (Word) X      
    TCS web site - (Excel) X      
    Publishing web site - (Fillable Adobe Acrobat) X X X X

    Note:

    Form 4549-A is labeled "Income Tax Examination Changes" in the RGS and BNA software. Form 4549-EZ can only be used for one tax year.

  2. Complete one of these forms each time an individual income tax computation is prepared. However, if Appeals sustains Compliance's findings or determines there is no change to the return, these forms are not required.

  3. Adapt these forms for fiduciary income tax computations where applicable.

8.17.2.7.2  (11-09-2007)
Forms Used in Corporate Income Tax Computations

  1. Either Form 5278, Form 4549, or Form 4549-A is required when computing corporate income tax. The table above shows information pertaining to these three forms. See IRM 8.17.2.7.1.

  2. Complete one of these forms each time a corporate income tax computations is prepared. However, if Appeals sustains Compliance's findings or determines there is no change to the return, these forms are not required.

  3. Prepare supporting tax computation schedules when required, e.g., personal holding company tax, accumulated earnings tax, fiscal computations involving a tax rate change, and short taxable year due to change in accounting period.

8.17.2.8  (11-09-2007)
Preparing the Face or Summary Sheet - Form 3610

  1. Generally the Form 3610, Audit Statement, is used as the face or summary sheet in the settlement computation package. The items to be completed are self explanatory. However when the settlement computation is for Counsel, the heading on the face sheet may be changed from "Audit Statement" to "Counsel Settlement Audit Statement" .

  2. The face or summary page of the settlement computation may be omitted in cases involving three years or less, provided all needed information is clearly and adequately presented in other parts of the statement.

    Note:

    This rule does not apply to Rule 155 Computations. Rule 155 Computations must always include a summary page.

  3. On Form 3610, specify penalties or additions to tax by Code section and enter amount immediately following "deficiency" or "overassessment" column for the particular tax year. If computations are required, prepare appropriate schedules.

  4. In the first column of Form 3610, list the tax years or periods covered by the Appeals or Counsel determination in the case. If the year is less than 12 months, or a 52–53 week year, include the beginning and ending dates. Additional columns are provided for listing deficiencies or overassessments in tax, additions to tax, and penalties. Alter columns to fit the circumstances but make sure they are properly identified.

    Note:

    Identify additions to tax and penalties by IRC section.

  5. Use the space at the bottom of Form 3610 for special items that require comment. If this space is not sufficient, use a continuation sheet. The following are some examples of items that may require additional explanation:

    1. Counsel Settlement - A statement that says, "Adjustment of tax liability shown herein is based on revision of prior determination to reflect Counsel’s settlement"

    2. Interest - A statement that says, "It is determined that interest will be assessed as provided by law on deficiencies in tax and additions to the tax or penalties due from the petitioner(s)."

    3. Recomputation Not Necessary for One or More Years - A statement that says, "No change to prior determination" ; "No change to determination in statutory notice of deficiency" ; "Prior determination reversed in full" ; or "Determination in statutory notice reversed in full."

    4. Advance Payments - When there are multiple years, multiple payments, or payments that have been separated by the taxpayer into categories, i.e. tax, penalty and interest, provide an explanation similar to the following:

      The deficiency shown above has been paid to the following extent:

      Date Paid Year Tax Penalty Interest
      4/15/2003 2001 $2,000 $1,000 $150
      4/15/2003 2002 $3,000 $ 500 $50
      Total paid   $5,000 $1,500 $200

    5. Restricted Interest - If restricted interest applies, show the restricted interest years and the IRC section under which the interest is restricted.

    6. Number of Pages or Schedules - In lengthy settlement computations where it would be useful to the taxpayer or helpful in assembling copies, note the total number of pages or schedules in the settlement computation.

    7. Tentative allowance - If a tentative allowance has been made and the case is being closed prior to determination of the correct carryback, add a statement to the effect that the tentative allowance is subject to correction upon determination of the correct amount of carryback. See IRM 8.17.5.3, Tentative Allowances and Other Carryback Claims, for an example of the statement.

    8. Joint Statutory Notice but Separate Petitions - When preparing settlement computations on these type of cases, it is recommended that the following statement be added:

      "The deficiencies in income taxes and penalties are duplications of the deficiencies and penalties set forth in the case of (enter name shown in petition), Docket No. ___. The petitioners in Docket Nos. ___and ___are jointly and severally liable for said deficiencies and penalties, plus statutory interest, and the payment of the entire amount of said deficiencies and penalties, plus interest, by either petitioner, or the petitioners jointly, will discharge the instant petitioner from liability."

      Note:

      This statement may be used on any Form 3610 requiring computations using joint filing status where the taxpayers have filed separate petitions.

8.17.2.9  (11-09-2007)
Completing the Adjustment and Tax Computation Schedule

  1. Form 5278, Form 4549, Form 4549-A or Form 4549-EZ is used as the adjustment and tax computation schedule in settlement computations for income tax cases.

  2. The starting point for settlement computations may be the return, or the latest prior determination report issued to the taxpayer, depending on the computer program used. Any practical and logical presentation of the results of Appeals’ determination is generally acceptable.

  3. Label each adjustment with a letter of the alphabet. List the title of each adjustment in the Adjustments to Income column by alphabetical order of the label. Extend amount of adjustment to applicable column. Depending on the computer software used, enter the adjustments per requirements of the software.

8.17.2.10  (11-09-2007)
Creating Schedules or Exhibits that Explain Adjustments

  1. The purpose of an explanation of adjustment is to clarify and explain. Some adjustments require no explanation; others, a short explanation or reference to a schedule or exhibit will suffice. The explanation may be listed on a separate explanation of adjustments page. Follow the sequence of adjustments listed on the computation schedule. (Forms 5278, 4549, 4549-EZ, etc.) If the adjustment can best be explained by sub-adjustments, use a numerical sequence for sub-adjustments.

  2. Determine what is needed in the way of explanations or supporting schedules and exhibits on a case-by-case basis. To decide whether an explanation is needed, ask these questions -

    1. Does the taxpayer need an explanation to understand the adjustment or to adjust his or her books?

    2. Would an explanation help the Appeals Officer?

    3. Is an explanation needed to adjust other years?

8.17.2.11  (11-09-2007)
The Rule 155 Computation Statement

  1. General — When a decision in a Tax Court case is neither entirely for petitioner nor entirely for respondent, Rule 155 of the Rules of Practice before the United States Tax Court requires that both parties submit computations, showing the amount of deficiency or overpayment to be entered as the decision pursuant to the Court’s determination of the issue.

    1. This discussion of Rule 155 computations uses the word "deficiency." Worker classification employment tax cases under IRC 7436 do not involve a deficiency (as defined in IRC 6211). The discussion in this IRM section however, applies to IRC 7436 cases as if the IRC 7436 notice of determination were a notice of deficiency.

    2. In addition, Rule 155 computations in certain post assessment proceedings such as interest abatement, spousal relief, and collection due process cases do not determine "deficiencies" . Often, such cases determine "liabilities" , or determine periods of interest abatement or other forms of relief.

    3. The Rule 155 computations may be modified, as appropriate, to fit these types of cases.

  2. Tax Computation Specialists prepare Rule 155 computation statements.

    1. Counsel sends the administrative file, accompanied by a transmittal memorandum setting forth all necessary adjustments, to Appeals. The transmittal memorandum covers the issues before the Court, including issues settled, conceded in session status, or raised by Counsel.

    2. Be alert for automatic adjustments not included in the transmittal memorandum. Handle any other issues in accordance with the notice of deficiency or pre-session settlement. Rely upon the transmittal memorandum and administrative file and not the legal file or decision for information, when ambiguities exist seek clarification from Counsel.

    3. Except in unusual cases, Counsel must file Rule 155 computations with the Court within 60 days from the date of the Court’s opinion. Therefore, when necessary, give priority to these computations.

  3. A Rule 155 computation statement consists of three parts — a summary page, the computation of tax schedules, and a statement of account.

    Note:

    A separate Rule 155 computation statement must be prepared for each docket number.

  4. Consecutively number all pages of the Rule 155 computation statement, including the statement of account.

8.17.2.11.1  (11-09-2007)
Summary Page (Face Sheet)

  1. The summary page (face sheet) is the first part of the computation statement. Form 3610 is not used as the summary page for Rule 155 computations. Instead, use a Word or Excel schedule for the summary page and include Counsel’s symbols, name and address of petitioner, docket number of case, and summary of tax liability.

    1. The petitioner's name is the name of the petitioner as it appears in the latest answer to the petition or motion filed with the United States Tax Court.

    2. Separately state each tax and each addition to tax and/or penalty for each year over which the court has jurisdiction.

    3. Make sure to correctly label applicable additions to tax or penalties as prescribed in the Code.

    4. Use the correct Code section(s) specifying the additions to tax or penalties determined by the court.

  2. However, in many cases the computation for the Court’s decision is different from the computation necessary for administrative use.

    1. In a Tax Court case we are, in effect, dealing with "two bookkeeping systems." The Service keeps its books on the basis of assessments and overassessments, while the Tax Court enters its decision on the basis of a "statutory deficiency" or an "overpayment."

    2. The deficiency determined by the Court may or may not be in the same amount as that assessed pursuant to the decision.

    3. Also, the overpayment determined by the Court may or may not be the same amount as the overassessment to be scheduled.

  3. Examples of the computation statement summary page (or face sheet) are included as exhibits. The following lists what each exhibit illustrates:

    1. A joint return of a husband and wife where separate petitions were filed. If the cases of a husband and wife are consolidated for trial in the Tax Court and only one docket number is assigned to the case, prepare only one computation statement. See IRM Exhibit 8.17.2-2.

    2. b) A straight deficiency case. See Exhibit 8.17.2-3.

    3. A no-change from the statutory notice situation or "short-form" computation. See IRM Exhibit 8.17.2-4.

    4. A net operating loss carryback issue. This format may be adopted for other restricted interest cases. See IRM Exhibit 8.17.2-5.

    5. An overpayment of tax and penalty under a jeopardy assessment situation. See IRM Exhibit 8.17.2-6.

    6. Situations that may arise in the preparation of the computation statements. These cover interim assessments (2003 year), jeopardy assessments (2004 year), and overpayments (2005 year). See IRM Exhibit 8.17.2-7.

    7. An estate tax liability where the Tax Court opinion provided for a decision under Rule 155 without proof of State inheritance tax payment. See IRM Exhibit 8.17.2-8.

    8. A transferee case. See IRM Exhibit 8.17.2-9.

    9. A barred overpayment. See IRM Exhibit 8.17.2-10.

    10. A deficiency, overpayment. See IRM Exhibit 8.17.2-11.

    11. An earned income credit case with a deficiency. Usually this detailed computation is only required for overpayment cases, and is not required for earned income credit cases with a deficiency. Use a normal deficiency setup instead. However, if this detail makes the calculations easier to understand, or the attorney requests the detail, then follow the format shown in the exhibit. See IRM Exhibit 8.17.2-12.

    12. An earned income credit case with an overpayment. See IRM Exhibit 8.17.2-13.

  4. Examples of the Rule 155 computation statement summary page (face sheet) are found in Counsel's IRM. See IRM Exhibits 35.11.1-200 through IRM Exhibit 35.11.1-208.

  5. The following are additional Counsel exhibits:

    1. Paragraph 3(a) of Counsel's IRM 35.8.6.3.1.3 states in the discussion of the Rule 155 computation statement summary page that "In many respects this part of the statement resembles a settlement stipulation. In overpayment cases, for example, the computation of the overpayment and statutory facts supporting it must be shown in the same manner as in settlement stipulations."

    2. In addition, IRM 35.11.1-201 states "In determining the format of the first part of the Computation Statement forms set forth herein, there should be considered not only the Rule 155 forms, but also the various illustrations shown in the forms of settlement documents" .

    3. Therefore, use the various settlement stipulation exhibits in IRM 35.11.1, Litigation Exhibits, for additional guidance in preparing the Rule 155 computation statement summary page.

8.17.2.11.2  (11-09-2007)
Computation of Tax in Rule 155 Computations

  1. The second part of the computation statement contains the complete recomputation of the tax liability. This part contains not only the basic computation upon which the summary of the facts and figures in the first part is based, but also it contains details necessary for administrative closing of the case under the Court’s decision.

  2. Use regular settlement computation forms, together with supporting schedules, for this part of the Rule 155 computation.

  3. The notice of deficiency (if applicable) is the starting point for adjustments.

  4. The type and format for explanations of adjustment are the same as those prepared in settlement computations. List the explanation of adjustments on a separate schedule or on Form 886-A.

8.17.2.11.3  (11-09-2007)
Statement of Account

  1. The third part of the computation statement is the statement of account, Form 3623. When properly completed, it contains all necessary information for Rule 155 computations. The statement of account is part of each Rule 155 computation. See IRM 8.17.3 for additional information on the completion of a statement of account.

  2. The statement of account is consecutively number as part of the Rule 155 computation.

Exhibit 8.17.2-1  (11-09-2007)
Forms Commonly Used in Settlement Computations

FORM No. kind of tax title
886-A All Explanation of Items
885-F Income Self-Employment Tax Adjustment
885-T Income Adjustment to Social Security Tax on Tip Income not reported to Employer
3610 All Audit Statement
4549 Income Income Tax Examination Changes
4549-A Income Income Tax Discrepancy Adjustments
4549-EZ Income Income Tax Examination Changes
4549-B Income Income Tax Examination Changes
4883 Chapter 42 Private Foundation Audit Changes
5278 Income Statement-Income Tax Changes

Other printed forms are available and may be used to make computations or to support computations. The following is a partial list of such forms. Computerized versions of these forms are acceptable. Many of these forms are available on the Appeals Tax Computation Specialist web site.

FORM No. title
886-S Partners' Shares of Income, Deductions and Credits
886-W Distribution of Beneficiaries' Shares of Income and Credits
886-X Small Business Corporation Shareholders' Shares of Income
1914 Computation of Allowable Depreciation Deduction of Items Changed
3621 Net Operating Loss Computation — Individuals and Corporations
3621-A Computation of Net Operating Loss Deduction
4605-A Examination Changes — Partnerships, Fiduciaries, Small Business Corporations and Domestic International Sales Corporations

The following is a partial list of forms used in the computation of life insurance cases:

FORM No. title
4389 Adjustment to Reserves and Required Interest
4392 Other Amounts of Income (Income not included in Investment yield, premium income or decrease in reserve)
4393 Death Benefits, etc.
4398 Dividends Paid
4399 Deductions for Dividends to Policyholders (Without Regard to Limitation under Section 809(f))
4402 Analysis of Surplus
4406 Gains and Losses from Sales or Exchanges of Property

Make sure that the schedule or exhibit used in an settlement computation is technically applicable and that the law in effect for the tax year in issue is correctly applied.

Exhibit 8.17.2-2  (11-09-2007)
Computation Statement (Rule 155), Husband and Wife, Income Tax and Penalty (Tabular Format)

CC:XXX:JDoe
       
In re:    (Name of Case)    
            (Petitioner's Address)  
       
    Docket No.    
       
  Deficiency  
       
  Year Income Tax Penalty
Sec. 6663a
       
  2001 $ 15,899.51 -
  2002 13,746.89 -
  2003 12,091.68 None
  2004 14,176.66 10,632.50
       
The aforesaid deficiencies in income taxes and penalties are duplications of the deficiencies and penalties set forth in the case of ( name of petitioner ), Docket No. __________, in which a computation pursuant to the Court's opinion dated __________ is concurrently being filed with the United States Tax Court. The petitioners in Docket Nos. __________ and __________ are jointly and severally liable for said deficiencies and penalties, plus statutory interest, and the payment of the entire amount of said deficiencies and penalties, plus interest, by either petitioner, or by the petitioners jointly, will discharge the instant petitioner from liability.
The details supporting the above computations are set forth on attached pages __________ to __________, inclusive.

Exhibit 8.17.2-3  (11-09-2007)
Computation Statement (Rule 155), Deficiency and Penalty

CC:XXX:JDoe
       
  In re: (Name of Case)  
    (Petitioner's Address)
       
    Docket No. ______  
       
  Income Tax  
  2001  
Deficiency     None
  2002  
Deficiency     $5,680.00
Penalty under IRC 6663(a) $4,260.00
       
The details supporting the above computations are set forth on attached pages __________ to __________, inclusive.

Exhibit 8.17.2-4  (11-09-2007)
Computation Statement (Rule 155), Income Tax Short Format No Change in Deficiency from Notice of Deficiency

CC:XXX:JDoe
       
In re:    (Name of Case)    
            (Petitioner's Address)  
       
    Docket No.    
       
  Income Tax  
       
  Year   Deficiency
       
  2001   $ 6,275.00
  2002   3,155.60
  2003   10,783.25
       
The deficiencies in income taxes due from the petitioner as shown above are as set forth in the notice of deficiency dated December 15, 2005 a copy of which is attached to the petition in the above-entitled case.
       
Note: The short format may be used only in cases in which the deficiency to be determined by the Court is in the same amount as determined in the notice of deficiency. However, it may not be used in cases involving any of the following factors: an overpayment; an adjustment in the Computation Statement which results in a lesser deficiency "to be assessed" or "to be paid" ; restricted interest computations; or in any case in which there are any special or additional computations necessary which are not shown in the supporting statement to the notice of deficiency. When the short format is appropriately used, parts two and three of the Computation Statement may be omitted.

Exhibit 8.17.2-5  (11-09-2007)
Computation Statement (Rule 155), Carryback Loss, Overpayment

CC:XXX:JDoe
       
  In re:  (Name of Case)  
             (Petitioner's Address)    
  Docket No. __________  
       
  Income Tax  
2001
Tax liability, computed without allowance for net operating loss carryback from 2004 to 2001 $ 300,000
Tax assessed and paid 200,000
Deficiency, without allowance for net operating loss carryback 100,000
Reduction in liability due to net operating loss carryback 75,000
Deficiency, after allowance for net operating loss carryback  25,000
=====
       No net operating loss carryback claim filed  
2002
Tax liability, computed without allowance for net operating loss carryback from 2004 to 2002. 100,000
Tax assessed and paid 75,000
Deficiency, without allowance for net operating loss carryback 25,000
======
Tax paid   75,000
    Payments:    
         March 15, 2003
June 14, 2003
September 15, 2003
December 15, 2003 		20,000
20,000
20,000
15,000		  
     Total payments 75,000  
Tax liability, after allowance for net operating loss carryback 60,000
Overpayment   $ 15,000
=======
  Sections 6512(b)(3)(C) and 6511(d)(2), Internal Revenue Code of 1986.
Return of 1986 filed, March 15, 2003
Claim for net operating loss carryback filed, December 15, 2005
Agreement executed, February 15, 2006 (extending statutory period to June 30, 2007)
Deficiency notice mailed, May 15, 2006
The details supporting the above computations are set forth on attached pages ________to________ , inclusive.

Exhibit 8.17.2-6  (11-09-2007)
Computation Statement (Rule 155), Jeopardy Assessment, Overpayment

CC:XXX:JDoe
       
  In re:    (Name of Case)  
  (Petitioner's Address)    
  Docket No. __________  
       
  Income Tax  
2001
Net tax assessed and paid $ 7,500
    Payments:    
         April 15, 2002 (statutory date)
April 15, 2002
December 13, 2004
May 20, 2006 (jeopardy assessment) 		$     150
400
6,250
750 		 
     Total payments $ 7,550  
Less: Allowance, June 2002 50  
  Net Payment 7,500  
Tax Liability   $ 6,500
Overpayment in Tax   1,000
  Sections 6512(b)(3)(A), 6512(b)(3)(B) and 6511(c), Internal Revenue Code of 1986
Return filed, April 15, 2002
No claim filed
Agreement executed, March 1, 2005 (extending statutory period to June 30, 2006)
Deficiency notice mailed, February 10, 2006
Penalty under IRC 6663(a), paid, May 20, 2006 (jeopardy assessment) 3,500
Liability for penalty 3,000
Overpayment in penalty 500
====
  Sections 6512(b)(3)(A) and 6512(b)(3)(B) and 6511(c), Internal Revenue Code of 1986.
Return filed, April 15, 2002
No claim filed.
Agreement executed, March 1, 2005 (extending statutory period to June 30, 2006)
Deficiency notice mailed, February 10, 2006.
The details supporting the above computations are set forth on attached pages to , inclusive.

Exhibit 8.17.2-7  (11-09-2007)
Computation Statement (Rule 155), Jeopardy Assessment, Deficiency and Penalty

CC:XXX:JDoe
  In re: (Name of Case)    
    (Petitioner's Address  
           
  Docket No. __________    
    Income Tax    
    2003    
Deficiency in tax, without taking into consideration the assessment subsequent to the mailing of the deficiency notice on April 1, 2006 $10,450.00
Assessment, May 2005: Paid $5,000.00  
      Not Paid 3,750.00 8,750.00
Deficiency (to be assessed)   $1,700.00
======
      2004    
Deficiency in tax, without taking into consideration the jeopardy assessment made prior to the mailing of the deficiency notice on April 1, 2006 $10,000.00
Assessment (Jeopardy) March 2006: Paid $5,000.00  
      Not Paid 4,000.00 9,000.00
Deficiency (to be assessed)   $1,000.00
======
Deficiency in penalty under IRC 6663(a), without taking into consideration the jeopardy assessment made prior to the mailing of the deficiency notice on April 1, 2006 $7,500.00
Assessment (Jeopardy), March 2006 (not paid) $6,750.00
Deficiency in penalty (to be assessed)   $750.00
======
    2005    
           
Tax Assessed and Paid   $5,300.00
Payments:
  April 15, 2006 (statutory date) $2,400.00  
  April 15, 2006 1,700.00  
  September 15, 2006 1,200.00  
Total Payments $5,300.00  
Total Liability       4,300.00
Overpayment $1,000.00
========
Sections 6512(b)(3)(C) and 6511(b)(2), Internal Revenue Code of 1986
Return filed, April 15, 2006      
Claim filed, October 1, 2006    
No agreements executed
Deficiency notice mailed, April 1, 2007  
The details supporting the above computations are set forth on attached pages _____ to _______, inclusive

Exhibit 8.17.2-8  (11-09-2007)
Computation Statement (Rule 155), Estate Tax

CC:XXX:JDoe
           
  In re:   (Name of case)  
      Petitioner's address  
     
Docket No. ___________
       
Date of Death: March 15, 2002  
       
Estate Tax
         
Deficiency $59,031.42
 
The petitioner may claim credit for State estate, inheritance, legacy or succession taxes and may present to the Internal Revenue Service proof of such payment within the statutory period
     
The details supporting the above computations are set forth on attached pages _____ to _______, inclusive
           

Note:

Normally the gross deficiency in estate tax is provided for in the Tax Court’s decision, and the petitioner may within the statutory period submit to the Service support for any claim for State estate taxes. However, if the petitioner submits proof of partial payment of State estate taxes and a partial credit is allowed in part two of the Computation Statement, the credit paragraph as illustrated in this form should be modified to set forth both the partial credit allowed and the maximum credit for which claim may be made. In this instance, however, the decision of the Tax Court should be for the gross deficiencies. If proof of the entire credit is submitted and allowed in part two of the Computation Statement, the deficiency set forth in part one of the Computation Statement and in the Tax Court’s decision would be for the net deficiency. In the latter instance, the word "net" should be added before the word "deficiency" and the credit paragraph should be omitted from part one of the Computation Statement.

Exhibit 8.17.2-9  (11-09-2007)
Computation Statement (Rule 155), Transferee

CC:XXX:JDoe
           
  In re: (Name of case) Transferee of Assets of (Name of Transferor)
    Petitioner's address  
     
Docket No. ___________
       
    (Name of transferor), Transferor
    (Transferor’s address)
       
Income Tax
    2001  
Liability $52,683.31
=========== 		 
plus interest on the above liability as provided by law from (date) to the date of payment.
   The aforesaid liability of the above-named petitioner, plus interest as provided by law, is a duplication of the deficiency set forth in the case of (name of transferor), transferor, Docket No. _______, and of the liability set forth in the case of (name of other transferee before the Court), transferee, Docket No. ________, in which cases computations of liability pursuant to the Court’s opinion dated are concurrently being filed with the United States Tax Court. The payment of the entire amount of the liability of the transferor, plus interest as provided by law, by any one or a combination of the petitioners liable therefore, will discharge the instant petitioner from liability.
     
   The details supporting the above computations are set forth on attached pages _____ to _______, inclusive
           

Note:

The duplication paragraph as illustrated above should be modified if the transferor case is not before the Tax Court, and should refer only to those transferees whose cases are docketed in the Tax Court and covered by the opinion involved. The Computation Statement for the transferor should be in the regular format used in any deficiency case.

Exhibit 8.17.2-10  (11-09-2007)
Computation Statement (Rule 155) - Portion of Overpayment Barred (Notice sent under six year period of IRC 6501(e)

CC:XXX:JDoe
           
           
  In re: (Name of case)  
    (Petitioner’s address)  
    Docket No. ____________  
  Income Tax  
      2001    
Tax Assessed and paid   $15,000.00
Payments:        
  April 15, 2002   $10,000.00  
  January 22, 2004   5,000.00  
   Total Payments   $15,000.00  
       
Tax Liability   9,000.00
Overpayment     $6,000.00
Overpayment Barred by Statute 1,000.00
Net Overpayment Allowable     $5,000.00
======
Section 6512(b)(3)(A), Internal Revenue Code of 1986
Return filed, April 15, 2002  
No claim filed    
No agreements executed    
Deficiency notice mailed January 8, 2004
           
The details supporting the above computations are set forth on attached pages _____ to _______, inclusive

Note:

Where there is a stipulated decision involving a barred overpayment, it is not necessary for the stipulation document to so indicate. The amount of the stipulated liability, should be increased by the amount of the barred overpayment so that the stated overpayment will be the amount which can be refunded or credited

Exhibit 8.17.2-11  (11-09-2007)
Computation Statement (Rule 155), Deficiency Overpayment

CC:XXX:JDoe
           
In re: (Name of case)
    (Petitioner's address)  
     
Docket No. ___________
       
Income Tax
2001
Deficiency   $614.13
=======
2002
Deficiency in tax None
=======
2003
Tax assessed and paid   $12,599.41
Payments:    
April 15, 2004 (statutory date) $3,681.00  
  April 15, 2004 7,763.14  
  November 17, 2004 1,155.27  
Total Payments   $12,599.41  
Tax Liability     7,683.42
Overpayment   $4,915.99
========
Sections 6512(b)(3)(B) and 6511(c), Internal Revenue Code of 1986
Return filed, April 15, 2004
No claim filed      
Agreements executed November 9, 2006 extending statutory period indefinitely
Deficiency notice mailed October 24, 2007
           
   The details supporting the above computations are set forth on attached pages _____ to _______, inclusive

Exhibit 8.17.2-12  (11-09-2007)
Computation Statement (Rule 155) Deficiency with EIC Recapture

CC:XXX:JDoe
           
In re: (Name of case)
    (Petitioner's address)  
     
Docket No. ___________
       
Income Tax
2005
Tax shown on return $0.00  
Less: EIC shown on return 1,515.00  
Tax on return ($1,515.00)
 
Correct tax $1,204.00  
Less: Correct EIC 1,948.00  
Tax Imposed   (744.00)
     
Tax Imposed (744.00)  
Less: Tax on Return (1,515.00)  
Statutory Deficiency to be Assessed 771.00
=======
           
The details supporting the above computations are set forth on attached pages _____ to _______, inclusive

Exhibit 8.17.2-13  (11-09-2007)
Computation Statement (Rule 155) with Allowance of Additional EIC

CC:XXX:JDoe
           
In re: (Name of case)
    (Petitioner's address)  
     
Docket No. ___________
       
Income Tax
2005
Tax shown on return $0.00  
Less: EIC shown on return 1,515.00  
Tax on return ($1,515.00)
 
Correct tax $200.00  
Less: Correct EIC 1,948.00  
Tax Imposed   (1,748.00)
     
Tax Imposed (1,748.00)  
Less: Tax on Return (1,515.00)  
Statutory Deficiency to be Assessed (233.00)
=======
Tax Imposed     (1,748.00)
Payments:      
   April 15, 2006 (Statutory date) 305.00  
Less Refund: May 12, 2006 (1,820.00)  
Net Payments     (1,515.00)
Overpayment     (233.00)
========
Sections 6512(b)(3)(B) and 6511(b)(2) of the Internal Revenue Code of 1986
Return filed April 15, 2006    
Deficiency notice mailed November 1, 2006
The details supporting the above computations are set forth on attached pages _____ to _______, inclusive

Note:

The earned income credit shown on the return of $1,515.00 is not included in the payments section, above, since it is included in the "Tax on Return" figure. Therefore, the only payment included is the withholding credits of $305.00. The taxpayer received a refund of $1,820.00. This is the total of the withholding credits of $305.00 and earned income credit claimed on the return of $1,515.00.


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