Estate closing letter doesn’t mean the IRS can’t take another look

Your Guide to State, Local, Federal, Estate + International Taxation

IRS Letter 627 (what we commonly refer to as an estate tax closing letter) is a confirmation the Internal Revenue Service provides to the fiduciary of an estate after they have finished reviewing and have accepted a Form 706 (an estate tax return). These letters are issued on request of the fiduciary no less than nine months after the filing of the Form 706. In this letter, the IRS specifies the amount of net estate tax, any state death tax credit or deduction, and any generation-skipping transfer tax (GST) for which an estate is liable.

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In Chief Counsel Advice (CCA) 202142010, the IRS concluded that issuing one of these closing letters does not preclude the IRS from subsequent examination of the Form 706. The IRS can reopen and reexamine the estate tax return under the following scenarios:

  1. If there is evidence of fraud, malfeasance, collusion, concealment or misrepresentation of a material fact.
  2. If there is a clearly-defined, substantial error based on an established IRS position.
  3. If there is another circumstance indicating that a failure to reopen the case would be a serious administrative omission.

The CCA states that a Letter 627 is not considered a closing agreement, therefore the IRS is not legally prohibited from examining the return.

This information is general in nature and should not be relied upon. If you have specific questions, please contact your Henry+Horne advisor.

Haley M. Braun, CPA