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circumstances justifying acceptance of an amount less than the
reasonable collection potential of the case based on public
policy or equity considerations. See Internal Revenue Manual
(IRM) sec. 5.8.4.3(4). However, in accordance with the
Commissioner’s guidelines, an offer-in-compromise based on doubt
as to collectibility with special circumstances should not be
accepted, even when economic hardship or considerations of public
policy or equity circumstances are identified, if the taxpayer
does not offer an acceptable amount. See IRM sec. 5.8.11.2.1(11)
and .2(12).
The Secretary may also compromise a tax liability on the
ground of effective tax administration when: (1) Collection of
the full liability will create economic hardship; or (2)
exceptional circumstances exist such that collection of the full
liability would undermine public confidence that the tax laws are
being administered in a fair and equitable manner; and (3)
compromise of the liability would not undermine compliance by
taxpayers with the tax laws. Sec. 301.7122-1(b)(3), Proced. &
Admin. Regs.
Petitioners proposed an offer-in-compromise based
alternatively on doubt as to collectibility with special
circumstances or effective tax administration. Petitioners
offered to pay $25,000 to compromise their outstanding tax
liabilities for 1981 through 1996, which they estimated to be
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