ance with the provisions of section 274 (a). (See article 1232.). (Art. 1211.)

For form of protest, see page 49.

FRAUD CASES.

REGULATION. If in the course of any field investigation it appears that a willful attempt has been made to evade tax, the report of the investigation will be forwarded immediately to the Commissioner at Washington. No copy of the report will be furnished to the taxpayer by the agent. After completion of the audit in the Income Tax Unit at Washington the taxpayer will be notified of such taxes and penalties as appear to be due and will be furnished with a statement showing the computation of tax and penalties. At the same time that such letter is mailed to the taxpayer, a copy thereof will be furnished to the proper supervising internal revenue agent or internal revenue agent in charge. Within 30 days from the date of such letter the taxpayer may file with the supervising internal revenue agent or internal revenue agent in charge a protest against the determination of the deficiency. The supervising internal revenue agent or internal revenue agent in charge shall cause full consideration to be given to any protest against the determination of any deficiency of tax, but any hearing on a protest against a proposal to assert the ad valorem fraud penalty will be under the supervision of the General Counsel of the Bureau of Internal Revenue, whose recommendation in regard to the assertion of the ad valorem fraud penalty will be obtained prior to final determination of the deficiency. After consideration the supervising internal revenue agent or internal revenue agent in charge will forward any statements from the taxpayer with his recommendations to the Income Tax Unit at Washington for review. The Unit at Washington will cause the protest of the taxpayer to be carefully heard, provided that request for hearing in Washington is made in the protest filed with the supervising internal revenue agent or internal revenue agent in charge. Thereafter final determination of the deficiency and of the penalty, if any, will be made, and the taxpayer will be notified by registered mail in accordance with the provisions of section 274 (a). (See article 1232.)

If in any case (except where it appears that a willful attempt has been made to evade tax) the taxpayer acquiesces in the tentative or final determination of the deficiency, the form consenting to assessment, which will be forwarded with the letter of notification, should be executed by the taxpayer and returned in order that assessment may be made forthwith. However, in any case in which it appears that a willful attempt has been made to evade tax, the form consenting to assessment, even though executed by the taxpayer, should not be accepted by the supervising internal revenue agent or internal revenue agent in charge. . . (Art. 1211.)

In all cases where fraud is alleged, all hearings are held in Washington under the supervision of the General Counsel. The General Counsel has reorganized the division handling fraud cases, so that now a taxpayer is assured of an impartial hearing. If a taxpayer does not believe he has been accorded an impartial hearing,

a protest should be made to the General Counsel himself or one of his assistants. Such protests should be supported by facts.

JEOPARDY CASES.—

REGULATION.

An immediate assessment without prior notice to the taxpayer may be made under section 279 (a) if it appears in any case that the collection of a deficiency would be jeopardized by delay. (See article 1281.). ... (Art. 1211.)

As a general rule, the only cases to fall within this class will be those where the Commissioner has failed to request a waiver, or where a waiver has been requested and the taxpayer refuses to file it. There is some doubt as to the validity of a jeopardy assessment made merely because the Commissioner has failed to request a waiver.

Jeopardy assessments in the case of the Commissioner practically nullify the running of the statute of limitations against the government. In the case of taxpayers they should make use of their remedy to defeat the running of the statute, which is to file adequate claims for refund covering each year in turn, to take care of favorable developments not known until after the ordinary limitation period expires.

Sixty-day Conference Unit.-At the present time, it is the policy of the Treasury not to make jeopardy assessment merely because the statutory period is about to expire. The same result is accomplished by the issuance of sixty-day letters. After petitions have been filed with the Tax Board, taxpayers are given an opportunity to present their cases before a special division in the Income Tax Unit.

This is a special procedure devised by the Treasury to treat all taxpayers alike. The Treasury recognized that it was unfair to permit one group of taxpayers to present their cases fully before the Treasury, and to deny to other taxpayers the right of such a hearing merely because it was necessary to issue a sixty-day letter.

Taxpayers should take full advantage of a hearing before this special Unit which has functioned rapidly and courageously. Many cases are being closed by this Unit, and as a result, the Board is being relieved of a large number of appeals.

After petitions have been filed with the Board, applications should be addressed to the Treasury requesting that the cases be

transferred to this special Unit for consideration, and that oral hearings be granted. A brief or protest, in the form outlined on page 49 should be filed setting forth in detail the facts and arguments in support of the contentions of the taxpayer.

If an agreement of settlement can be reached with this special Unit, a stipulation setting forth the correct deficiency is prepared which, after it has been properly signed by the taxpayer or his attorney and the General Counsel, is filed with the Tax Board.

The foregoing procedure applies to all cases where for any reason the Treasury has issued a sixty-day letter without first giving the taxpayer an opportunity to fully present his case to the Treasury.

Bankruptcy and receiverships.—

LAW. Section 282. (a) Upon the adjudication of bankruptcy of any taxpayer in any bankruptcy proceeding or the appointment of a receiver for any taxpayer in any receivership proceeding before any court of the United States or of any State or Territory or of the District of Columbia, any deficiency (together with all interest, additional amounts, or additions to the tax provided for by the law) determined by the Commissioner in respect of a tax imposed by this title upon such taxpayer shall, despite the provisions of subdivision (a) of section 274, be immediately assessed if such deficiency has not theretofore been assessed in accordance with law. Claim for the deficiency and such interest, additional amounts and additions to the tax may be presented, for adjudication in accordance with law, to the court before which the bankruptcy or receivership proceeding is pending, despite the pendency of proceedings for the redetermination of the deficiency in pursuance of a petition to the Board; but no petition for any such redetermination shall be filed with the Board after the adjudication of bankruptcy or the appointment of the receiver.

(b) Any portion of the claim allowed in such bankruptcy or receivership proceeding which is unpaid shall be paid by the taxpayer upon notice and demand from the collector after the termination of such proceeding, and may be collected by distraint or proceeding in court within six years after termination of such proceeding.

(c) If the amount of such portion of the claim is not paid in full within 10 days from the date of notice and demand from the collector, then there shall be collected as a part of such amount interest upon the unpaid portion thereof at the rate of 1 per centum a month from the date of such notice and demand until payment. Extensions of time for such payment may be had in the same manner and subject to the same provisions and limitations as are provided in subdivision (k) of section 274 in the case of a deficiency in a tax imposed by this title.

REGULATION.

While the Commissioner is required by section 282 to make immediate assessment of any deficiency, such assessment is not a jeopardy assessment within the meaning of section 279, and con

sequently the provisions of that section do not apply to any assessment made under section 282. Therefore, the notice of the deficiency provided for in section 279 (b) will not be mailed. Although such notice will not be issued, nevertheless a letter will be sent to the taxpayer or to the trustee or receiver in the bankruptcy or receivership proceeding, advising him in detail how the deficiency was computed, that the deficiency was assessed under the provisions of section 282, that he may furnish evidence showing wherein the assessment is incorrect, and that upon request he will be granted a hearing with respect to such assessment. If after such evidence is submitted and hearing held any adjustment appears necessary in the assessment, appropriate action will be taken looking to the submission of an amended claim in bankruptcy or receivership. A copy of the notification letter will be attached to the assessment list as the collector's authority for filing claim in bankruptcy or receivership for the amount represented by the assessment, plus interest at the rate of 6 per cent per annum for the period from the date of filing claim by the collector to the date of termination of the bankruptcy or receivership proceeding, or to the date of payment if payment is made in full prior to such termination. At the same time claim is filed with the bankruptcy or receivership court, the collector will send notice and demand for payment to the taxpayer together with a copy of such claim. (Art. 1294.)

The notice is made in the following form:

In accordance with the provisions of Section 282 of the Revenue Act of 1926, there has been assessed against you an income and profits tax amounting to for the taxable years the details of which are set forth in the attached statements.

and

Attention is called to Section 64 (a) of the Bankruptcy Act and Section 3466 of Revised Statutes of the United States, which direct priority in payment of taxes due the United States before other claims, and to further provision of Section 3467 of Revised Statutes imposing personal liability upon executors, administrators, assignees, trustees, etc., for failure to protect the right of the United States to the priority in payment prescribed by statute.

In order to facilitate adjustment of any objections raised respecting the above-mentioned deficiency a request for reconsideration may be submitted in writing to the Commissioner of Internal Revenue, Washington, D. C., within thirty days after the date of this letter, making reference to symbols appearing on same. Such request should be either accompanied with or promptly followed up by detailed statement, under oath and in triplicate, of objections to the taxes shown. Affidavits or other data supporting taxpayer's objections should also be furnished with same and request made for conference before the Bureau, if desired.

The collector is authorized to file proof of claim for any tax liability in bankruptcy and receivership cases to protect the interests of the Government, but filing such proof of claim will not prejudice any application of the taxpayer, trustee or receiver to the Bureau for reconsideration of an assessment made under Section 282.

The form of protest which appears on page 49 can, with a few minor changes, be converted into a "request for reconsideration" under section 282.

Agreements consenting to assessments.-Generally an assessment letter is accompanied by a form asking the taxpayer either to consent to the additional tax or to protest against it. (See Art. 1211, page 38.) If the taxpayer consents to the assessment, he waives his rights to a hearing before the Income Tax Unit as well as an appeal to the Board of Tax Appeals. Unless the form is modified, there is also a chance that the taxpayer may be waiving his rights to file claims for refund.

These forms should not be signed without proper advice. Taxpayers should also be sure that they understand what action has been taken on claims for refund, credit, or abatement which may be on file. Sometimes an assessment letter may apparently show an overpayment, but when consideration is also given to a claim for abatement previously filed which has been rejected, the "overpayment" becomes merely a partial offset to a larger amount of additional tax.

The agreement in no way binds the Commissioner, and he may at any time within the statutory period determine an additional deficiency, unless of course there is a final closing under section 1106. (See Chapter 5.)

Audit under priority order.-The Treasury has provided that priority of consideration shall be given to certain enumerated cases in which exceptional circumstances are found to exist. Application for such expeditious disposition must comply with the following:

RULING. If, upon application of any taxpayer, it be shown to the satisfaction of the Commissioner (1) that the taxpayer is in the hands of a receiver and a reorganization is necessary; (2) that the taxpayer is in financial difficulties, either actual or imminent, and refinancing is necessary; or (3) that the distribution of a fund in which a large number of people may be interested is held up pending the determination of the amount of income or profit taxes which must be paid out of the fundthen the Commissioner will declare an emergency to exist with reference to such case and will direct that the matter be given priority of consideration with a view to the expeditious determination of the particular tax liability.

Application for such priority of consideration shall be in the form of a letter addressed to the Commissioner and shall be supported by statements under oath setting forth in detail the facts upon which the request for special consideration is based, and the particular reason why such person believes himself entitled to have the case expedited as provided herein. (C. B. I-1, 308; T. D. 3329.)