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The parties agree that respondent did not issue petitioners
a deficiency notice, that no statutory exception to the
restrictions on assessment applies, and that petitioners have not
waived the restrictions on assessment. Accordingly, respondent
may not proceed with collection unless, as respondent argues, the
closing agreement obviates the need for a deficiency notice.
B. The Closing Agreement Covering Specific Matters Does
Not Render Deficiency Notice Unnecessary
1. Types of Closing Agreements
We now address closing agreements. The Commissioner may
enter into an agreement with any person regarding his or her
liability for any taxable period. Sec. 7121(a). These
agreements are final and conclusive and bind the parties as to
matters agreed upon. Sec. 7121(b); Urbano v. Commissioner, 122
T.C. 384, 394 (2004). They may be reopened only in exceptional
circumstances such as fraud, malfeasance, or misrepresentation of
a material fact. Urbano v. Commissioner, supra. All closing
agreements shall be executed on forms prescribed by the Internal
Revenue Service. Id.; sec. 301.7121-1(d), Proced. & Admin. Regs.
The Commissioner has prescribed two forms of closing
agreements, each used in different circumstances. One type of
closing agreement is a final determination of a taxpayer’s
liability for a past taxable year or years. Zaentz v.
Commissioner, 90 T.C. 753, 760-761 (1988); Rev. Proc. 68-16,
1968-1 C.B. 770. This type of closing agreement is completed on
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