-9-
Second Notice of Deficiency
Petitioners assert that their case was closed and cannot be
reopened because respondent has not satisfied the policy section
of Rev. Proc. 94-68, 1994-2 C.B. 803. Respondent’s procedural
rules for reopening cases closed after examination are set forth
in Rev. Proc. 94-68, supra. The Internal Revenue Service’s
policy is not to reopen a closed case to make an adjustment
unfavorable to the taxpayer unless:
(1) there is evidence of fraud, malfeasance, collusion,
concealment, or misrepresentation of a material fact;
(2) the prior closing involved a clearly defined
substantial error based on an established Service
position existing at the time of the previous
examination; or
(3) other circumstances exist that indicate failure to
reopen would be a serious administrative omission.
Id. sec. 5.01, 1994-2 C.B. at 804.
Petitioner alleges that respondent’s decision to reopen the
case does not satisfy any of the above criteria. Procedural
rules such as Rev. Proc. 94-68, supra, are merely directory, not
mandatory, “and compliance with them is not essential to the
validity of a notice of deficiency.” Luhring v. Glotzbach, 304
F.2d 560, 563 (4th Cir. 1962); accord Cleveland Trust Co. v.
United States, 421 F.2d 475, 481-482 (6th Cir. 1970); Geurkink v.
United States, 354 F.2d 629, 632 (7th Cir. 1965); Cataldo v.
Commissioner, 60 T.C. 522, 523 (1973), affd. 499 F.2d 550 (2d
Cir. 1970); Flynn v. Commissioner, 40 T.C. 770, 773 (1963);
Miller v. Commissioner, T.C. Memo. 2001-55. Furthermore, the
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