By Megan L. Brackney
Journal of Passthrough Entities
September - October 2016 Edition
In my last column, I discussed the IRS’s prerogative to change its mind—to approve of a tax reporting position in one year, and then assess penalties on the ground that the taxpayer was negligent or did not have substantial authority for having taken that position in a later year.1 In this column, we will look at whether the IRS’s prerogative to change its mind extends to breaching a closing agreement with a taxpayer. In the recent decision in A. Davis,2 although the IRS conceded it had breached its own closing agreement, the Court allowed the assessment of tax to stand. This column summarizes the rules for IRS closing agreements and then discusses the Davis case.