The following is an excerpt from:

"For Whom the Tax Tolls: Significant Events That Extend IRS Collection Rights"

Published in Tax Practice & Procedure - October/November 2004

By Michael S. Fried and Zachary S. Fried

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Two Hundred and Forty Day Assessment Period

Although tolling of the 240-day period is unsettled if an offer in compromise is made prior to the start of the 240-day assessment period, Bankruptcy Code Section 507(a)(8)(A)(ii) requires that an offer in compromise stops the clock on the running of the 240- day assessment period if the offer in compromise is made during the 240-day period. In the case of Dr. Delinquent's 1997 tax liability, assessment of the 1997 tax liability and commencement of the 240- day assessment period occurred just nine days prior to the day the taxpayer's offer in compromise was accepted for processing by the IRS. Pursuant to Bankruptcy Code Section 507(a)(8)(A)(ii), the 240-day assessment period was tolled for the entire time the offer was pending, and did not again begin running until the offer in compromise was rejected on December 9, 2003.

Fortunately, by September 15, 2004, the date of our first appointment with Dr. Delinquent, 258 days had expired since the December 9, 2003, offer rejection date. Despite the tolling effect of the offer in compromise, the 240-day assessment period for the taxpayer's 1997 liability had already expired. Additionally, since termination of the offer in compromise occurred more than 240 days ago, the 240-day assessment period had expired for all of the taxpayer's pre-1997 tax liabilities.

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