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IRM, sec. 57(10)9.1(1)-(2) (Feb. 26, 1992).
An offer is unprocessable if: (1) The taxpayer is not
identified; (2) the liabilities to be compromised are not
identified; (3) no amount is offered; (4) appropriate signatures
are not present; (5) financial statement is not provided; (6) the
offer does not reasonably reflect net equity in assets on Forms
433-A and 433-B and amounts recoverable from future income
sources, as reflected on financial statements;6 (7) an obsolete
Form 656 is used; or (8) the taxpayer alters the terms on Form
656. IRM, sec. 57(10)9.1(3) (Feb. 26, 1992).
1. Petitioners’ First Offer in Compromise
On September 19, 1994, petitioners submitted Form 656,
offering to compromise their 1993 tax liability for $5,000 on the
ground of doubt as to collectibility. Petitioners submitted
Forms 433-A and 433-B in support of their offer.
By letter dated December 20, 1994, respondent advised
6 However, the Internal Revenue Manual cautions:
judgment should be exercised when deciding whether to
return an offer as unprocessable for this reason alone.
It may be desirable to receive an offer into inventory
which does not technically meet this criterion. This
would apply if the amount offered is close enough to
the sum of net equity from Forms 433-A and 433-B, and
amounts recoverable from future income sources that
successful negotiation with the taxpayer could be
pursued.
IRM, sec. 57(10)9.1(3)(f) (Feb. 26, 1992).
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