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Petitioners and respondent executed a closing agreement
covering specific matters on Form 906. The specific matters
included the treatment of Comco items on petitioners’ returns for
the years at issue. The agreement did not cover all items
affecting petitioners’ tax liability. In their closing
agreement, the parties did not agree to the amount petitioners
owed for the years at issue, and, in fact, the closing agreement
specifically states that it does not affect or preclude later
adjustments of non-Comco items for the years at issue.5
2. Effect of Closing Agreement on Deficiency
Notice Requirement
We agree that a deficiency notice is not required before
assessment if a taxpayer and the Secretary execute a closing
agreement on Form 866, finally determining the taxpayer’s
liability for the year.6 Marathon Oil Co. v. United States, 42
5Respondent was examining petitioners’ returns when the
parties executed the closing agreement and, over several years,
adjusted the amounts petitioners owed several times. Subsequent
adjustments were not only contemplated in the parties’ closing
agreement. They actually occurred.
6In cases where the parties agree to the amount of the
taxpayer’s liability, such as those involving Form 866, the
taxpayer has already agreed to the deficiency amount and that the
deficiency is proper. Thus, a deficiency notice would provide no
additional safeguards and is not required. Marathon Oil Co. v.
United States, 42 Fed. Cl. 267, 280 (1998), affd. 215 F.3d 1343
(Fed. Cir. 1999). Moreover, a closing agreement may not be
reconsidered in the absence of fraud, malfeasance, or
misrepresentation of a material fact. Sec. 7121(b). Absent
these exceptional circumstances, the closing agreement remains
binding and could not be reopened in an action to redetermine a
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