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This is the Arnold case which was discussed earlier here. Most think the IRS was punatitve & unfair. However, the specific language of the law is:

"before the close of the 5-year period beginning with the date of the first payment..."

Unfortunately this is pretty specific language particularly the "date of first payment". Note that it does not say "year of first payment".

Further, this is statutory language; e.g. legislated by Congress as opposed to some rule or reg. published by the IRS. As a result the IRS has little choice but to take a literal read of the law & enforce it.

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