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The instructions for Form 656, Offer in Compromise, which
petitioners used to prepare their offers in compromise in 1996
and 1997, state how to calculate an acceptable offer in
compromise:
How to Figure An Acceptable Offer
An acceptable offer must include all amounts
available from the following sources: * * *
(1) The liquidating value of your assets (value if
you are forced to sell) minus debts against specific
assets that have priority over IRS.
* * * * * * *
(2) The amount we could collect from your present
and future income. Generally, the collectible amount
is your income minus necessary living expenses. We
usually consider what we can collect over five years.
* * * * * * *
(3) The amount collectible from third parties. We
may be able to collect part or all of the amount you
owe from third parties through the trust fund recovery
penalty or transferee liabilities (assets you
transferred below market value or transferred assets
you still use).
* * * * * * *
(4) Assets or income that are available to you but
may not be available to IRS for direct collection
action, e.g., property outside the United States.
* * * * * * *
(5) Minimum offer (total items (1) through (4))
$ ________
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Last modified: May 25, 2011