(1) In Examination, Form 5348, Examination Update, is used to update statute of limitation information on AIMS. Form 5348 may be used to request statute updates on ERCS, the Examination Returns Control System. Statute updates on ERCS will automatically update the same data on AIMS. See IRM 4.4.34, Updating/Correcting AIMS Data Base, and IRM 4.7.3, Examination Returns Control System (ERCS) - Statute of Limitations.

(2) In EP, EO and GE Form 5595, TE/GE Update, is used to generate statute of limitation information on AIMS. Form 5595 may be used to generate statute updates on EPIC, Employee Plans Inventory Control, and EOIC, Exempt Organization Inventory Control. EPIC and EOIC updates will not automatically update AIMS.

(3) An extended or corrected statute expiration date is entered in this format: MMDDYYYY, representing two digits each for the month and day and four digits for the year. For example: 04152006.

Once a statute update has been input on AIMS and the statute expiration date is more than 180 days from the date AIMS Table 4.0 or 4.1 is generated, the return will no longer appear on the table.

(4) When an open-ended consent has been secured, for example, Form 872-A, Special Consent to Extend the Time to Assess Tax, enter "872-A " in the ASED field. When a Form 872–IA, Special Consent to Extend the Time to Assess Tax As Well As Tax Attributable to Items of a Partnership, has been secured, enter "872-IA."

This entry does not remove the return from AIMS Table 4.0 or 4.1. The "872-A" or "872-IA" designation will appear on the table indicating an open-ended consent has been secured.

Where a restricted consent to extend the statute is accepted, ensure that all deficiencies other than those covered by the extension are assessed (partial assessment) before the statute is updated, on AIMS and on ERCS/EPIC/EOIC, to the extended expiration date. Statute consent code "R" must be input to AIMS if a restricted consent agreement is entered into with the taxpayer. For guidelines for restricted consents, see IRM 25.6.22.8, Restricted Consents..

Updating ASED upon Issuance by Area Office of a Statutory Notice of Deficiency or Notice of Final Partnership Administrative Adjustments (FPAA)
When a statutory notice of deficiency is issued the Technical Services' issuing office will update the ASED on returns with a calendar date ASED to include the minimum number of days the period for assessment is suspended from running (90 or 150 days if the notice is addressed to a person outside the United States plus 60 days for a total of 150 or 210 days) in order to reflect the best information available with respect to the statute of limitations at the time the notice of deficiency is issued. Should the updated ASED change, for example, as a result of an agreement by the taxpayer to the deficiency, then the ASED would be updated again to reflect the new information.
When an FPAA is issued, the Technical Services' issuing office will update the ASED of the TEFRA entity to include the minimum number of days the Tax Matters Partner (TMP) or other partners have to petition the Tax Court, District Court or Claims Court (90 days for TMP plus 60 days (after 90th day) for other partners for a total of 150 days as per IRC § 6226) plus one year as per IRC § 6229 to reflect the best information available with respect to the statute of limitations at the time the FPAA is issued.

Alpha Codes
A two-digit alphabetic code designating a special statute situation may be entered in the day (DD) position of the statute date on AIMS, ERCS, EPIC and EOIC. For example, if FF is entered for a reference return and the actual statute expiration date is 04152006, the statute date will be entered on AIMS as 04FF2006.
An alpha code on the AIMS statute data base does not remove the return from AIMS Table 4.0 or 4.1. It creates a message indicating that special conditions exist which affect the statute expiration date. Also, it should be noted that the ASED is updated on AIMS as the result of entering an alpha code but the ASED is not updated at Master File.

CAUTION! Assessment statutes have expired and the ability to assess a tax liability has been lost through improper use of alpha codes. It is important that persons making alpha code determinations understand how the tax law impacting the periods of limitation applies in each particular situation.

Alpha coding the ASED should only be considered after attempting to extend the assessment statute or where there is not sufficient time to attempt to protect the assessment statute when the return is received in the examining group (generally, less than 30 calendar days prior to the return’s ASED) or an attempt to protect the statute on the return is unsuccessful.

There can be more than one special statute condition for a given tax period. In such cases, the statute controls should reflect the calendar date the period for assessment will expire, until it is determined with certainty which special assessment statute condition is to be relied upon to alpha code the AIMS ASED.

As a general rule, the alpha code should not be entered on AIMS and on statute control records prior to 180 days before expiration of the normal statutory period for assessment and the individual ASED alpha code descriptions below should be read in the context of this general rule. The exception to this general rule is that alpha code EE may be entered on AIMS in nonfiler situations at the time the AIMS record for the nonfiled tax period is established. Also, alpha code ZZ may be input prior to 180 days before expiration of the normal statutory period for assessment to enable transfer of the return.

Most alpha codes apply only when precise requirements of the law are met. The alpha code should be used only when it is clear that all essential elements of the applicable law are present.

For protection of the persons making and approving the ASED alpha code determination, in cases where the normal statutory period for assessment is still open, a statement in the Remarks section of Form 895 is required. The signatures or initials of the employee charged with the return and the manager next to the statement give added assurance that all aspects of the alpha code condition have been carefully considered.

The procedures, immediately below, are to be followed in those instances when the examiner and Group/Team Manager have made a decision to let the normal assessment statute expire in reliance on the extended assessment statute provisions of IRC §§ 6501(c)(1), false or fraudulent return; 6501(c)(8), failure to notify Secretary of foreign transfers; 6501(c)(9), gifts not adequately disclosed on return; 6501(c)(10), failure to provide information with respect to "listed transactions" ; 6501(e), substantial omission of items; 7609(e), suspension of statutes of limitations resulting from third-party summons. Also, see alpha code YY, below, for the requirement to document the case file and secure Territory Manager concurrence if this alpha code is being entered on AIMS.

   AA — Claim for Refund/Credit Only Issue

AA designates a claim for refund/credit was filed timely by the taxpayer and a decision has been made that there are no other issues on the return which will warrant an additional assessment and the claimed refund has not been paid to the taxpayer. The statute is held open for refund or credit up to the amount of the claim subject to the limitation on the amount provided by the lookback rules of IRC § 6511(b) (e.g., for a refund claim filed within the 3-year period, the amount is limited to the tax paid during the 3-years immediately preceding the filing of the claim, plus the period of any extension of time for filing the return).

 AA should not be used if there are issues which could result in additional assessment of tax or penalties. The statute for assessment is not kept open by the timely filing of a claim for refund/credit.

 If the statute for assessment is open when a claim is received, the actual statute expiration date, rather than AA, should be entered initially on the statute control records. The statute controls should be updated to AA only after the examiner or TE/GE specialist is certain there is no likelihood of a tax or penalty assessment and only after the examiner ascertains that the refund amount has not already been paid to the taxpayer. An appropriate statement in the Remarks section of Form 895 would be:  "The return was inspected and there are no material issues other than those on the claim and the claimed refund has not been paid" .

 AA may be used for formal claims, informal claims, and for taxpayer requests for abatement of unpaid tax (AIMS source code 73 - Taxpayer Request, also know as Audit Reconsiderations). Also, see alpha code SS —Financial Disability, for claims filed after the normal statute of limitations which are based on a claim of financial disability, as defined in IRC § 6511(h)(2).

AB—Assessment Statute of Limitations Waived by Properly Executed Closing Agreement

AB designates that the statutory limitation pertaining to the period of time for assessment of tax for the taxable period has been waived by a closing agreement that has been properly executed by both the taxpayer and a delegated Service official. The month (MM) and year (YYYY) entries accompanying the AB alpha code are the month and year the statute expired, absent the properly executed closing agreement waiving the assessment statute of limitations.

   BB — NOL or Capital Loss Carryback

 BB designates a net operating loss or capital loss carryback situation wherein the period of time for assessing a deficiency on the carryback year return is determined, under IRC § 6501(h) or § 6501(k), by the statute date of the loss year (source) return. The assessment statute of the loss year return or the assessment statute of the carryback return(s) must be protected in order to assess a deficiency in tax on a carryback year due to any changes to the loss carryback if a tentative allowance or the claim for refund resulting from the carryback has been paid.

BB may be used when the taxpayer has filed as a result of a carryback loss either an Application for Tentative Allowance (Forms 1045, Application for Tentative Refund, and 1139, Corporation Application for Tentative Refund) or a claim for refund (Forms 1040X, Amended U.S. Individual Income Tax Return, or 1120X, Amended U.S. Corporation Income Tax Return) in which the claim for refund has been paid to the taxpayer and, if the assessment statute on the carryback year(s) has not already expired, there are not "general" adjustments to the return for the carryback year in the case of claim for refund which has been paid or there are not " general adjustments" in the case of a tentative allowance that will result in tax to be assessed which is greater than the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the loss carryback) for the carryback year.. While " general" adjustments in the carryback year can be made to extent they do not result in a deficiency greater than the tentative allowance amount, care must be exercised due to the difficulty of determining the amount of tax attributable to the "general" adjustments and whether or not the tax resulting from the "general" adjustments will exceed the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the loss carryback). If the assessment statute on the carryback year(s) is still open, BB should not be used if there may be "general" adjustments to tax for the carryback year which will exceed the tentative allowance amount as that deficiency would need to be assessed based on the ASED of the carryback year without regard to the provisions of IRC § 6501(h) or 6501(k)"General" adjustments are tax adjustments in the carryback year unrelated to the loss carryback.

 When BB is used, some examples of appropriate statements in the Remarks section of Form 895 would be:

 BB is entered in the day (DD) position of the statute date field. The month (MM) and year (YYYY) positions designate the statute date of the loss year. For example: a 2000 carryback year return has a statute expiration date of 04152004 and the 2003 loss year return has a statute date of 04152007; the statute for the 2000 carryback year return will be updated to 04BB2007. The 04BB2007 designation will drop the carryback year return from AIMS Tables 4.0 and 4.1 until the 2007 date again comes within 180 days of expiring.

 BB is not used for the loss year return or for tax years having losses carried forward. An update to the statute expiration date for the loss year return will necessitate updating the BB statute date on the carryback years. If there is a Form 872-A extending the ASED on the loss year return, then the ASED of the carryback year would be 872-ABB. Similarly, if there is a Form 872-IA extending the ASED of the loss year return, the ASED of the carryback year would be 872–IABB.

   CC — Joint Investigation

 CC is used for tax periods covered by a Form 10498–B, Joint Investigations Intent to Solicit Consent to Extend Statute, or memorandum signed by the Territory Manager and Criminal Investigation, or the Area Director (Area Manager in TE/GE), stating that no consent to extend the statute should be secured. See IRM 25..1.4.3.6(8). An appropriate statement in the Remarks section of Form 895 would be: "Concurrence memorandum approved on [date signed by the Territory Manager or the Area Director]."

 CC may also be used with a tax return under joint investigation which has a statutory period for assessment that expired before the return was established on AIMS.

If Criminal Investigation withdraws from the joint investigation prior to the expiration of the statute, the statute controls should be updated to reflect the normal statute expiration date, or other applicable ASED alpha code, for example NN or OO, if some other exception to the normal three-year assessment statute applies.

If it is ultimately determined that there is no exception to the normal ASED, then replace the CC alpha coded ASED with the actual statute expiration date. If the ASED has in fact expired and an assessment can not be made, refer to IRM 25.6.14.4.8, Statute Expiration Reporting Responsibilities and Procedures for SB/SE Area Office and Campus Organizational Components Involved Directly with or Providing Support for Tax Return Examinations, (or other procedures required by your particular organizational component) for the procedures for preparing and submitting a Form 3999, Statute Expiration Report.

   DD — Credit Carryback

DD designates a credit carryback situation wherein the period of time for assessing a deficiency on the carryback year return is determined, according to IRC § 6501(j) and 6501(k), by the statute date of the return from which the credit was carried and according to IRC § 6501(i), the statute date of the return giving rise to the excess tax credit plus one year.

Credits which may be carried back are general business credits, as defined in IRC § 39, foreign tax credits, as defined in IRC § 904(c) and disallowed oil and gas extraction taxes, as defined in IRC § 907(f) – but see discussion of foreign tax credits and disallowed oil and gas extraction taxes, below.

For general business credit carrybacks, DD may be used when the taxpayer has filed either a claim for refund (which refund has been paid to the taxpayer) or an Application for Tentative Allowance (Forms 1045 and 1139) as a result of a credit carryback and, if the assessment statute on the carryback year(s) has not already expired, there are not "general adjustments " that will result in tax to be assessed which is greater than the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the credit carryback) for the carryback year. While "general" adjustments in the carryback year can be made to extent they do not result in a deficiency greater than the tentative allowance amount, care must be exercised due to the difficulty of determining the amount of tax attributable to the"general" adjustments and whether or not the tax resulting from the "general" adjustments will exceed the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the credit carryback). If the assessment statute on the carryback year(s) is still open, DD should not be used if there may be "general" adjustments to tax for the carryback year which will exceed the tentative allowance amount as that deficiency would need to be assessed based on the ASED of the carryback year without regard to the provisions of IRC § 6501(j) or 6501(k)"General" adjustments are tax adjustments in the carryback year unrelated to the loss carryback.

Foreign tax credits and disallowed oil and gas extraction taxes: The Forms 1045 and 1139 cannot be used to carryback unused foreign tax credits or disallowed oil and gas extraction taxes but if the tax credit was carried back on an amended return and the claimed refund amount resulting therefrom had been refunded to the taxpayer, then IRC § 6501(i) would allow assessment of a deficiency resulting from the tax credit carryback so long as the assessment statute is open on the tax period giving rise to the excess tax credit plus one year. The alpha code DD may be used in these circumstances to code the AIMS ASED for the carryback tax period to designate the applicability of the § 6501(i) statute.

Credits can be "released" as a result of loss carrybacks from a subsequent year and made and made available for carryback or carryover to some other year. In these situations, the ASED for assessing a deficiency for the refunded amount or the tentative allowance amount of the " released" credit that is attributable to the loss carryback is also determined under § 6501(j) or 6501(k).

 When DD is used, some examples of appropriate statements in the Remarks section of Form 895 would be:

 DD is entered in the day (DD) position of the statute date field. The month (MM) and year (YYYY) positions designate the statute date of the tax year generating the credit.

 For example: a 2000 return with a statute date of 04152004 is a carryback year. The credit is carried from the 2003 year which has a statute expiration date of 04152007. The 2000 carryback year return will be updated to reflect a corrected statute date of 04DD2007. The 04DD2007 designation will drop the carryback year return from AIMS Tables 4.0 and 4.1 until the 2007 date is again within 180 days of expiration.

 DD is not used for the tax return which generated the credit nor for tax years having credits carried forward. An update to the statute expiration date for the tax year which generated the excess credit will necessitate updating the DD statute designation on the carryback years. If there is a Form 872-A extending the ASED on the return generating the credit carryback, then the ASED of the carryback year would be 872-ADD. Similarly, if there is a Form 872-IA extending the ASED of the loss year return, the ASED of the carryback year would be 872–IADD.

   EE — No Return Filed

 EE designates no return has been filed by the taxpayer. Therefore, there is no statute expiration date.

 EE is used in the AIMS ASED when a substitute for return is prepared by the IRS, either by inputting AM 424 with an appropriate push code to post an SFR TC 150 to Master File or by the IRS filing an actual IRC 6020(b) return to assess the types of taxes that can be assessed without the IRS first issuing a notice of deficiency. The month and year appearing with EE represent the normal statute expiration date if the return had been timely filed.

 When a late filed return is received from a taxpayer, the examiner or specialist will replace the EE statute designation with a true statute expiration date based on the date the return was received by the Service. The examiner or specialist will obtain transcripts throughout the examination, at least once a year, to check for postings (such as transaction code 976 or 977) indicating a return may have been filed. See IRM 4.4.9, Delinquent and Substitute for Return Processing, for additional information.

   FF — Reference Return

 FF is used when a return is requisitioned for reference only (source code 45) and there is no expectation of making a tax assessment for the tax period. If the statute is still open when a reference return is secured, the true statute expiration date should be used, rather than FF, until a definite determination is made that there will be no tax change.

 If a reference return is examined, replace the 45 source code with a source code appropriate for an open examination and replace the FF statute designation with the actual statute expiration date.

   GG — Non-TEFRA Flow-through

  GG is used for non-taxable, non-TEFRA Form 1065 (partnership) and Form 1120S (S corporation) returns. The statute for assessments flowing from non-TEFRA returns is determined on the returns of the partners or shareholders.

 If there is a possibility of a tax assessment on Form 1120S or if a final determination has not been made that the partnership comes within the TEFRA provisions, code GG should not be used.

   HH — TEFRA Investor

 HH is used for returns of partners in TEFRA partnerships and shareholders in TEFRA S corporations, having only TEFRA flow-through adjustments and the assessment statute is protected at the TEFRA entity level for all TEFRA entities from which an adjustment to the TEFRA investor's return is to be made. HH must not be used if there are non-TEFRA adjustments at the partner or shareholder level.

 The only S corporation returns which may come under TEFRA are those for tax years beginning after December 31, 1982 and beginning before January 1, 1997.

HH is used by campus TEFRA units where partner and shareholder returns are held pending only the outcome of TEFRA partnership and S corporation examinations.

Area offices may use HH when the return of the partner or shareholder are only subject to TEFRA flow-through adjustments. Area offices will not use the HH code for open partner or shareholder examinations when issues other than TEFRA flow-through adjustments exist.

 

II — Form 1040, Other Taxes

II is used to indicate that the Form 1040 return is being examined for the non-filing or underreporting of taxes reportable in the Other Taxes section of the Form 1040, and to indicate that a determination has been made that there are no income tax issues (Tax and Credits before consideration of Other Taxes) of material tax consequence on the Form 1040 return which require examination or the assessment statute has already expired with respect to the income taxes.

Since the extended tax assessment statute resulting from the non-filing of Other Taxes only applies to the tax liability relating to the Other Tax and does not apply to the income tax ASED, a careful determination that no income tax issues are present on the return must be made before alpha coding the AIMS ASED with II, if the income tax ASED has not otherwise expired at the time the alpha coding determination is being made. If there are income tax issues of tax consequence based on inspection of the Form 1040 and the period for assessment of the income taxes has not expired, do not code the AIMS ASED with II. Action must be taken to protect the income tax assessment statute of limitations.

Also, consideration needs to be given to protecting the assessment statutes for the Other Taxes, for which an examination is warranted, rather than relying on a non-filing determination to permit assessment of the Other Taxes at any time. Care must be exercised whenever a separate return or schedule required for an Other Tax is not filed with the Form 1040 return and the Service will rely on a non-filing determination to permit assessment of the Other Tax at any time. In particular, before concluding that filing of Form 1040 has no effect on the period for assessment of an Other Tax, make sure that it has been determined that the Other Tax is separate and distinct from the income taxes imposed by subtitle A of the IRC. See Rev. Rul. 79-39, 1979-1 C.B. 435 (FICA taxes on tip income are separate and distinct) and Rev. Rul. 82-185, 1982-2 C.B. 395 (self-employment taxes are not separate and distinct from income taxes). There is no separate ASED reflected on Master File or AIMS for these Other Taxes as Master File only reflects the ASED of the Form 1040 so the ASED for Other Taxes needs to be determined separately in instances of non-filing of Other Taxes.

Non-filing for the purposes of this AIMS alpha code means that the taxpayer filed a Form 1040 return but did not attach the information specified by the form or form instructions. An example of Other Taxes required to be reported on the Form 1040 return are household employment taxes, which are required to be reported in the Other Tax section of the Form 1040 and are to be supported by the attachment to the Form 1040 of a Schedule H, Household Employment Taxes. A taxpayer’s entry of a "zero" on the Form 1040 line item prescribed for reporting household employment taxes without supplying the supporting Schedule H will not start the running of the statute of limitations for household employment taxes. For example, a taxpayer who mistakenly computes wages and, therefore, honestly believes he has no tax liability and follows the IRS guidance that the schedule does not have to be filed, has not started the period of limitations (the "first position" ). The same treatment should apply if a number (greater than zero) is entered in the Other Tax section without the supporting schedule being supplied (the "second position" ). Case law specifically addressing the Schedule H has yet to be established regarding these positions.

If the taxpayer did report a tax liability for household employment taxes (in this example) on the Form 1040, the II AIMS alpha code can be used to designate that the return is being examined for household employment taxes only but Form SS-10 should be used to extend the assessment statute for household employment taxes, if necessary, even if AIMS is coded with the II alpha code. Again, there is presently no way to indicate the Other Tax ASED on AIMS. The month and year of the ASED on AIMS when using the II alpha code should be the month and year of the expiration of the Form 1040 ASED whether or not there was a filing or nonfiling of the Other Tax.

In addition to the household employment taxes discussed above, the alpha code II can be used to designate that the period for assessment has not expired for such Other Taxes as the Social Security and Medicare tax on tip income not reported to the employer and the excise taxes on excess contributions or accumulations in qualified retirement or other plans. For a comprehensive list of Other Taxes reported on the Form 1040 depending upon the tax period under consideration, see the instructions for the Other Tax section of the Form 1040. Again, as stated above, care must be exercised to determine that the underlying tax being considered requires the filing of a" return" for taxes which are separate and distinct from the income taxes imposed by subtitle A of the IRC and the Other Tax being considered has a period for assessment which has not already expired. For additional information, also see IRM 25.6.5.5.3, Forms Reporting More Than One Item of Tax.

   JJ — Non-taxable Fiduciary

 JJ is used for Form 1041 fiduciary returns for which it has been determined that the fiduciary entity is not a taxable entity for the tax periods in question but is a flow-thru entity. The assessment statutes are determined on the returns of the beneficiaries receiving flow-through items from the Form 1041.

   KK — Bankruptcy Suspense

 KK is used for returns of taxpayers who file petitions in Bankruptcy Court and the assessment statute is suspended pending resolution of the bankruptcy (unless the court lifts the stay earlier). Since, for bankruptcy petitions filed after October 22, 1994, the issuance of a statutory notice of deficiency is necessary in order for the bankruptcy stay to suspend the period of time for assessment, the KK alpha code should only be input by those employees managing the inventory of returns submitted for placement in or actually in a Bankruptcy Suspense status.

 Where a bankruptcy petition was filed before October 22, 1994, the statute is suspended during the period of time the bankruptcy stay is in effect plus 60 days as the Service is prohibited from making an assessment and is prohibited from issuing a statutory notice of deficiency. Where a bankruptcy petition is filed on or after October 22, 1994, the statute is suspended during the period of time the bankruptcy stay is in effect if a valid statutory notice of deficiency has been issued and no waiver of restriction on assessment is received.

Where a bankruptcy petition is filed on or after October 17, 2005, in the case of an individual taxpayer, the assessment statute is suspending from running on the pre-petition tax periods once the notice of deficiency is issued and during the period of time the bankruptcy stay prescribed in 11 USC 362 is in effect. Post bankruptcy petition tax periods should not be placed in bankruptcy suspense and alpha coded KK as the assessment statute is not suspended from running by the bankruptcy stay.

In the case of corporate taxpayers, the tax periods to which the bankruptcy stay is applicable will be determined by the Bankruptcy Court. Therefore, once the court determines the tax periods for which the stay is in effect and after the notice of deficiency is issued, then the tax periods to which the bankruptcy stay is applicable should be alpha coded KK and placed in bankruptcy suspense.

 When the bankruptcy stay is lifted, a new statute expiration date must be determined. Then the KK alpha statute code will be replaced by the recomputed assessment statute expiration date.

   LL — Third-Party Summons

 LL is used when the statute of limitations on assessment (but not collection) under IRC § 6501 or the statute of limitations on criminal prosecution under IRC § 6531 is suspended by operation of IRC § 7609(e)(1) or (e)(2). The suspension provisions operate as follows:

  • IRC § 7609(e)(1) suspends the statutes of limitations under circumstances where a third party is served with a summons that is subject to the notice requirement of § 7609(a), and the taxpayer (whose liability is being investigated by that summons) either intervenes in a suit to enforce the summons or files a petition to quash the summons. Under these circumstances, the taxpayer's statutes of limitations (for the tax periods which are the subject of the summons) are suspended for the period during which a proceeding, and appeals therein, are pending.

  • IRC § 7609(e)(2) suspends the statutes of limitations under circumstances where a recipient of a John Doe summons issued under § 7609(f) or where a recipient of a third-party summons that is subject to the notice requirement of § 7609(a) fails to comply with the summons for more than 6 months after the summons was served. Under these circumstances, the taxpayer's statutes of limitations (for the tax periods which are the subject of the summons) are suspended for the period beginning 6 months after the date the summons was served and ending on the date the summoned party finally resolves his response to the summons.

IRC § 7609(e)(1) and 7609(e)(2) should generally be relied upon to extend the period for assessment only in those instances when the ASED has otherwise expired. The ASED may be coded LL when it has been determined that § 7609(e)(1) or 7609(e)(2) is applicable and the normal three-year assessment statute applicable to the return may be allowed to expire if: (1) a consent to extend the assessment statute for the return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the return expire in reliance on § 7609(e)(1) or 7609(e)(2) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

   MM — IRC Section 183(e)(4): Activity Not Engaged in for Profit

 MM is used when a taxpayer makes the election under IRC § 183(e) to extend the statute until two years after the due date (determined without regard to extension of time for filing) for filing the last return to be considered in determining whether or not an activity is engaged in for profit. MM should not be used if there are potential adjustments to tax in addition to the § 183 issue.

 The month and year accompanying the MM alpha code will be the date determined under IRC § 183(e)(4). For example: if the due date for the final year involved in a § 183 determination is April 15, 1999, the alpha code designation for the tax years held open by the IRC § 183(e) election would be 04MM2001.

   NN — IRC Section 6501(e): Substantial Omission of Items

 NN is used to indicate that the Service is relying on a substantial omission of items meeting the requirements of either IRC § 6501(e)(1), (e)(2) or (e)(3), which pertain to income taxes, estate and gift taxes and excise taxes, respectively, as the exception to the normal three-year period of time for assessment of tax. The tax may be assessed within 6 years after the date the original return was filed or due, whichever is later, if the taxpayer omits:

The burden of proving omission of items is on the government. The ultimate test is did the taxpayer adequately apprise the Service of the nature and amount of the item. Therefore, as a general rule, the Service relies on § 6501(e) to keep the statute open only in situations where the normal three-year statute has otherwise expired.

The ASED may be coded NN when it has been decided that reliance on § 6501(e) is warranted and the normal three-year assessment statute applicable to the return may be allowed to expire if: (1) a consent to extend the assessment statute for the return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the return expire in reliance on § 6501(e) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

The 6-year limitations period applies to assess deficiencies and additional taxes with respect to taxpayer's entire return, Colestock v Commissioner, 102 TC 380 (1994).

The assessment period was extended to 5 years under the law at that time (now 6 years under current law) despite filing of an amended return, after the return due date, which included part of income omitted from original return so that omission on the amended return was not over 25 percent, Goldring v Commissioner, 20 TC 79 (1953); Houston v Commissioner, 38 TC 486 (1962).

 Once it has been determined that IRC § 6501(e) applies, .the ASED should be updated to the applicable six-year statute date. While the NN alpha code is being used in the ASED, the year (YYYY) accompanying the NN alpha code will be that of the six-year expiration date.

   OO — IRC Section 6501(c)(1): False or Fraudulent Return (taxpayer not under joint investigation)

 OO is used when the Service is relying on the provisions of IRC § 6501(c)(1), relating to the filing of a false or fraudulent return with the intent to evade tax, to keep the statute open. If fraud is proven, there is no limit on the period of time for assessment. Also, the taxpayer can not undo the fraudulent return by filing a nonfraudulent amended return, Badaracco v. Commissioner, 464 U.S. 386 (1984). So, if the original return is fraudulent, an increase in the tax liability can be assessed at any time.

 If the return is under joint investigation, CC should be used rather than OO. The OO alpha code may be used for cases where the government can prove civil fraud and the statute for the entire return is not kept open by any other provision of the law.

As a general rule, the Service relies on § 6501(c)(1) to keep the statute open only in situations where the normal three-year statute has otherwise expired.

The ASED may be coded OO when it has been determined that § 6501(c)(1) is applicable and the normal three-year assessment statute applicable to the return may be allowed to expire if: (1) a consent to extend the assessment statute for the return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the return expire in reliance on § 6501(c)(1) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

ASED alpha code OO can also be used when the Service is relying on the fraudulent acts and intent to evade tax on the part of the return preparer to keep the assessment statute open on the returns of the preparer's clients, see Allen v. Commissioner, 128 T.C. No. 4 (2007).

 The month (MM) and year (YYYY) entries accompanying the OO alpha code are the month and year the statute would expire if the return was not false or fraudulent.

When a case is closed agreed from the group to Centralized Case Processing for assessment where § 6501(c)(1) has been relied upon to extend the assessment statute for a particular tax period, flag the case file with a Form 3198, Special Handling Notice for Examination Case Processing, and enter in the statute information section, proximate to the applicable tax period, the AIMS ASED as month/OO/year, (format: mm/OO/yyyy). In the Special Features, Other Instructions section enter: "6501(c)(1), assessment can be made at any time" . If the case is closed as unagreed for issuance of a statutory notice of deficiency or for routing to Appeals, then the OO alpha code should be reflected in the ASED field.

   PP — Non-taxable TE/GE Return

 PP is used for non-taxable returns under examination in TE/GE. Tax returns in EP and EO are initially controlled using actual statute expiration dates. The PP code may be used when it is determined with certainty the non-taxable return will not be converted to a taxable return.

 The month (MM) and year (YYYY) accompanying the PP alpha code will be the date of statute expiration as if it were a taxable return.

   QQ — Docketed Case

 QQ is used by Appeals and Counsel for cases docketed for trial in the United States Tax Court and by Technical Services for docketed cases which Appeals/Counsel has asked Technical Services to temporarily hold in inventory rather than transferring to Appeals.

   RR — IRCs that Override IRC Section 6501(a)

 RR is used when another code section overrides IRC § 6501(a) and the special statute condition is not otherwise designated by another ASED alpha code. If RR is used, the Form 895 must reflect which particular IRC section applies and why.

An example of an IRC section which overrides § 6501(a) is IRC § 1033(a)(2)(C) under which a taxpayer whose property is involuntarily converted may elect to recognize only the gain that exceeds the cost of the replacement property acquired within a limited period of time. The RR code indicates that the statutory period for assessment is extended due to the IRC § 1033 election. In this example, RR may be used as long as the taxpayer has not notified the Service, in the manner prescribed in the relevant regulations, regarding replacement of the property. After the taxpayer notifies the Service that the converted property has been replaced or will not be replaced, a new statute expiration date will be determined, taking into account the suspension of the statute under IRC 1033, and the RR code will be replaced with the calendar date ASED.

 In the above example, the statute for assessment is kept open only for tax attributable to gain on the involuntary conversion so a determination must be made that the involuntary conversion is the only issue of tax consequence before the extended assessment statute of IRC § 1033 is relied upon to allow the ASED for the entire return to expire and the ASED is alpha coded RR.

The month (MM) and year (YYYY) entries accompanying the RR alpha code are the month and year the statute would expire if there was no involuntary conversion to consider in determining the ASED, in this example.

   SS — Financial Disability

 SS is used when a claim is received after the normal statute of limitations for filing a claim for credit or refund of tax has expired and the person signing the claim for credit or refund indicates that the taxpayer, an individual, is claiming financial disability. Internal Revenue Code § 6511(h), which was added by the IRS Restructuring and Reform Act of 1998, suspends the statute of limitations period for filing a claim for credit or refund in certain situations. See Rev. Proc. 99–21, 1999-1 C.B. 960, for specifics on the proper application of this provision.

 For example, an individual taxpayer timely filed his or her 2002 tax return. For the entire year of 2005 the taxpayer experienced a financial disability, as defined in § 6511(h) . In December of 2006 the taxpayer filed a claim for refund of taxes paid for 2002. The normal statute of limitations for credit or refund would have expired 04/15/06. However, due to the taxpayer's financial disability, running of the statute of limitations period for filing a claim for credit or refund is suspended for the period when the taxpayer was financially disabled (in this example, one year) — provided the procedures in Rev. Proc. 99–21 are followed. The ASED would be entered as 04SS2006, the date the ASED expires, to denote the claim filed based on § 6511(h).

   TT — Mitigation

 Under IRC § 1311, the Service is allowed to correct the effect of an erroneous treatment of an item in a taxable year which is closed by the statute of limitations under certain specific circumstances. These mitigation provisions apply only in seven specific circumstances (see description in IRC § 1312 and Treas. Reg. §§ 1.1312-1 through 1.1312-8). In general, the mitigation provisions are intended to offset the benefit a party might otherwise obtain by maintaining a position in an open tax year that is inconsistent with the treatment of the same item in a closed year (e.g., a taxpayer receives a double deduction.) Until a determination (as defined in IRC § 1313) is made, TT should be used to identify the otherwise statute-barred year as a year coming within the mitigation provisions of IRC §§ 1311–1314. The month (MM) and year (YYYY) entries accompanying the TT alpha code are the month and year the normal three-year statute expires. Once the determination is made, the ASED must be updated to the new one-year statute expiration date, which is one year from the determination date – IRC 1314(b).

UU — Failure to Notify Secretary of Foreign Transfers

UU is used to indicate that, as per IRC § 6501(c)(8), the period for assessment of tax with respect to any event or tax period will not expire before a date which is three years after the information required to be reported by IRC §§ 6038, 6038A, 6038B, 6046, 6046A or 6048 is furnished. If the information is not furnished, then the assessment statute, as determined by § 6501(c)(8), is unlimited with respect to the tax liability relating to the transaction/event for which the required information has not been furnished. Other exceptions to the normal statutory period for assessment of tax may also apply to the tax return in question.

The information to be furnished is transactional or event information of the type required to be reported by the above code sections, and regulations thereunder, on the currently prescribed forms (listed below) or as encompassed in applicable future form revisions and form number re-designations and is generally applicable to information the reporting of which is due after August 5, 1997. Prior to amendment in 1997, the § 6501(c)(8) exception applied to information required to be provided under § 6038B with respect to § 367 exchanges and distributions.

Reporting forms, as of the date of this memorandum, by IRC section:

Unlike some of the other exceptions contained in § 6501(c), this exception only applies to the tax liability relating to the transaction/event for which the required information has not been furnished and does not apply to the ASED for the entire return; therefore, IRC § 6501(c)(8) should generally be relied upon to extend the period for assessment only in those instances when the ASED for the entire return has otherwise expired.

The ASED may be coded UU when it has been determined that § 6501(c)(8) is applicable and the normal three-year assessment statute applicable to the entire return may be allowed to expire if: (1) a consent to extend the assessment statute for the entire return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on § 6501(c)(8) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

Once the required information is furnished so that the ASED can be determined and either the ASED on the entire return has otherwise expired or the Territory Manager has approved reliance on § 6501(c)(8) in advance of the expiration of the statute on the entire return in accordance with the above procedures, update the ASED to the date determined under § 6501(c)(8) and enter an "R" indicator, which indicates, in this instance, the restrictions applicable to the § 6501(c)(8) exception. The ASED determined under § 6501(c)(8) is three years after the date the required information is furnished.

The ASED determined under § 6501(c)(8) can be extended by consent agreement but the examiner needs to bear in mind that consent agreements to extend the § 6501(c)(8) ASED only apply to the period for assessing the tax liability related to the transaction/event for which information was required to be furnished.

VV — Gifts Not Adequately Disclosed on Return

VV is used to indicate that the period for assessment of the tax imposed by Chapter 12 on gifts not adequately disclosed on the return may be assessed at any time. This exception to the normal three-year period for assessment is provided for in IRC § 6501(c)(9), which was originally added to the Code by P.L. 101-508, effective for gifts made after October 8, 1990

Generally, § 6501(c)(9) should only be relied upon to extend the assessment statute if the normal three-year assessment period has otherwise expired, since this exception to the normal three-year period for assessment only applies to the ASED for assessing tax with respect to the inadequately disclosed gifts and not the ASED for the entire return.

The ASED may be coded VV when it has been determined that § 6501(c)(9) is applicable and the normal three-year assessment statute applicable to the entire return may be allowed to expire if: (1) a consent to extend the assessment statute for the entire return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on § 6501(c)(9) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

For gifts made after October 8, 1990, and before January 1, 1997, the following Code provision is applicable: section 6501(c)(9) - "Gift tax on certain gifts not shown on return. If any gift of property the value of which is determined under section 2701 or 2702 (or any increase in taxable gifts required under section 2701(d)) is required to be shown on a return of tax imposed by chapter 12 (without regard to section 2503(b)), and is not shown on such return, any tax imposed by chapter 12 on such gift may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. The preceding sentence shall not apply to any item not shown as a gift on such return if such item is disclosed in such return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature of such item."

For gifts made after December 31, 1996, the following Code provision is applicable:section 6501(c)(9) - "Gift tax on certain gifts not shown on return. If any gift of property the value of which (or any increase in taxable gifts required under section 2701(d) which) is required to be shown on a return of tax imposed by chapter 12 (without regard to section 2503(b), and is not shown on such return, any tax imposed by chapter 12 on such gift may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. The preceding sentence shall not apply to any item which is disclosed in such return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature of such item."

In deciding whether or not a gift was adequately shown/disclosed on the return, see Treas. Reg. § 301.6501(c)-1(e) and Treas. Reg. § 301.6501(c)-1(f).

WW — Failure to Provide Information with Respect to "Listed Transactions" (does not apply to taxable years with respect to which the period for assessing a deficiency expired before October 22, 2004, the date of enactment of American Jobs Creation Act (AJCA)

WW is used to indicate that, per IRC § 6501(c)(10), the period for assessment of tax with respect to a "listed transaction " that the taxpayer failed to disclose as required under § 6011 will not expire before one year after the earlier of either the date the taxpayer discloses the transaction in accordance with prescribed procedures (see Rev. Proc. 2005-26, 2005-17 I.R.B. 965 (April 25, 2005), or subsequently published guidance) or the date a "material advisor" meets the requirements of § 6112 with respect to a request by the Secretary under § 6112 relating to the transaction.

If neither the taxpayer nor the "material advisor" disclose the required information, the period of time for assessment of any tax with respect to the "listed transaction" is unlimited. Other exceptions to the normal statutory period for assessment of tax may also apply to the tax return in question and, of course, § 6501(c)(10) does not shorten any other applicable period for assessment, such as the general three-year period prescribed by § 6501(a).

The American Jobs Creation Act of 2004 (AJCA), Public Law 108-357, amended IRC § 6501(c) by adding a new exception, 6501(c)(10), to the normal three-year period for tax assessment in those instances when the taxpayer does not provide information with respect to a "listed transaction" as required under § 6011. Section 6707A(c)(2), which was added by the AJCA, defines a "listed transaction" as a transaction that is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction. Treas. Reg. § 1.6011-4(b)(2) also defines "listed transactions."

Unlike some of the other exceptions contained in § 6501(c), this exception only applies to the tax liability related to the " listed transaction" and not to the ASED for the entire return; therefore, IRC § 6501(c)(10) should generally be relied upon to extend the period for assessment only in those instances when the ASED for the entire return has otherwise expired.

The ASED may be coded WW when it has been determined that § 6501(c)(10) is applicable and the normal three-year assessment statute applicable to the entire return may be allowed to expire if: (1) a consent to extend the assessment statute for the entire return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on § 6501(c)(10) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

In order to determine if the one-year period under § 6501(c)(10) has started to run, the examiner should consult Rev. Proc. 2005-26, or subsequently published guidance, to determine if the taxpayer or "material advisor" has complied with the requirements contained in the applicable published guidance.

Since a consideration of section 4 of the revenue procedure is that the required disclosure also be provided by the taxpayer to the Office of Tax Shelter Analysis (OTSA), even when the taxpayer provided the required information with the return filing, a process has been established to determine whether or not, and the date, this requirement to provide OTSA with the disclosure has been met. Contact OTSA by telephone at (801) 620-5121 or by fax at (801) 620-5122 to ascertain the fact of filing of the required disclosure with OTSA.

If the requirements of Rev. Proc. 2005-26 have not been satisfied by the taxpayer or the "material advisor," update the ASED for the tax period using Alpha Code WW in the "day day" position of the AIMS ASED field.

Once the required information is furnished so that the ASED can be determined and either the ASED on the entire return has otherwise expired or the Territory Manager has approved reliance on § 6501(c)(10) in advance of the expiration of the statute on the entire return in accordance with the above procedures, update the ASED to the date determined under § 6501(c)(10) and enter an "R" indicator, which indicates, in this instance, the restrictions applicable to the § 6501(c)(10) exception. The ASED is one year after the earlier of the date the taxpayer discloses the transaction, as discussed in the above-referenced revenue procedure, or the date that a "material advisor" meets the requirements of § 6112 with respect to a request by the Secretary under § 6112 relating to the transaction.

The ASED determined under § 6501(c)(10) can be extended by consent agreement but the examiner needs to bear in mind that consent agreements to extend the § 6501(c)(10) ASED only apply to the period for assessing the tax liability related to the "listed transaction."

XX — Return Preparer, Promoter and Aiding/Abetting Penalties (Only Used For ERCS Controls, not an AIMS entry)

XX is used on ERCS to designate that a return preparer penalty under IRC § 6694(b) may be assessed at any time. Return preparer penalty controls for penalties under § 6694(a) and 6695 are to reflect a date three years after either the due date of the return (without regard to an extension of time to file) or the date the return or claim for refund with respect to which the penalty is assessed was filed, whichever is later. XX can be used to designate that a return preparer penalty under § 6713 for preparer's unauthorized disclosure or use of taxpayer information may be assessed at any time.

XX also can be used to designate that the penalties under IRC § 6700 and 6701 for promoting abusive tax shelters and aiding and abetting understatement of the tax liability, respectively, may be assessed at any time. See IRM 20.1.6.1.8, Statute of Limitations.

    YY — Participation in Abusive Offshore Arrangements — Returns generally controlled under Project Codes 0020, Brokerage Initiative; 0127, Offshore Credit Card; 0160, Offshore Transactions; 0237, Foreign Trusts; 0671, Offshore Compliance Project, as well as returns controlled under any projects pertaining to abusive offshore arrangements subsequently approved by headquarters (see http://abusiveshelter.web.irs.gov/AbusivePromotions/ProjectCodes.htm#Offshore for currently approved Offshore Projects)

 YY is used when the decision is made to allow the normal statute of limitations to expire on the Offshore Project returns involving participation in abusive offshore arrangements, (e.g., Offshore Credit Card Project, Offshore Voluntary Compliance Initiative, Last Chance Compliance Initiative, Broker Initiative, or participants identified pursuant through a promoter investigation which involves tax avoidance/evasion tactics based on offshore arrangements) and the decision to allow the normal assessment statute to expire has been timely and properly documented, including approval by the Territory Manager. The documentation requirement to support the determination that special conditions exist will be satisfied by including the statement, "as a part of the OCCP (or LCCI, Broker Initiative, or promoter investigation involving tax avoidance/evasion tactics based on offshore arrangements), it has been determined that there is a likelihood in this case that one or a combination of the following conditions exists: (1) the tax return is false/fraudulent; (2) a sufficiently large omission of gross income to rely on the 6-year assessment statute; or, (3) failure to notify the Secretary of foreign transfers (section 6501(c)(8))" .

Generally, the YY ASED alpha code should only be used for tax returns filed by participants in abusive offshore arrangements where it has yet to be determined whether or not a specific statutory exception to the normal 3-year period of time for assessment of tax applies.

YY may also be used to alpha code the AIMS ASED when the normal 3-year period of time for assessment of tax has already expired before commencement of the examination of a return for a tax period which involves abusive offshore arrangements and it has yet to be determined whether or not a specific statutory exception to the normal 3-year period of time for assessment of tax applies.

If it is determined that some exception to the normal period for assessment applies, update the ASED to the applicable alpha code, for example, NN for § 6501(e), or OO for § 6501(c)(1) or UU for the § 6501(c)(8) exception.

The month (MM) and year (YYYY) entries accompanying the YY alpha code are the month and year the normal three-year statute expires.

If it is ultimately determined that there is no exception to the normal ASED, then replace the YY alpha coded ASED with the actual statute expiration date. If the ASED has in fact expired and an assessment can not be made, refer to IRM 25.6.14, Statute of Limitations – Barred Assessments/Barred Statute Cases (or other procedures required by your particular organizational component) for the procedures for preparing and submitting a Form 3999, Statute Expiration Report, or other form prescribed by your organization.

ZZ — Transfer of AIMS Database

Used to update the AIMS ASED temporarily to allow the transfer of the AIMS database. The terminal will not accept a transfer (Disposal Code 30) if the statute of limitations has expired or will expire within the times prescribed in IRM 4.4.33.3.1, Transfer Restrictions–Statute of Limitations, unless certain other conditions specified in IRM 4.4.33.3.1 are met.

Approval must be received from the receiving (gaining) unit before ZZ can be input. The receiving unit must change the AIMS ASED, which has been alpha coded ZZ, to the correct ASED upon receipt of the AIMS database. See IRM 4.4.33.3.1, Transfer Restrictions–Statute of Limitations.