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are not entitled to interest on the $40,000 submitted with their
offer in compromise. We still must decide, however, whether
respondent erred in the computation of petitioners’ interest
liability by failing to toll the accrual of interest for the
period in which respondent held the $40,000.
In contending that interest should not accrue during the
period in which respondent held the $40,000, petitioners do not
cite to any specific authority. Rather, they rely on the general
“use of money” principle described in Avon Products, Inc. v.
United States, 588 F.2d 342 (2d Cir. 1978), and developed by its
progeny.
On the record in the instant case, we conclude that we
cannot hold that respondent abused discretion and we cannot hold
that there was a computational error with regard to the period
25(...continued)
amount tendered with the offer, including all installments
paid, shall be refunded without interest, unless the
taxpayer has stated or agreed that the amount tendered may
be applied to the liability with respect to which the offer
was submitted.
This regulation, in effect for the period in which
petitioners submitted their offer in compromise, was removed and
replaced by sec. 301.7122-1T, effective July 21, 1999. 64 Fed.
Reg. 39026 (July 21, 1999). The temporary regulation, “with
minor changes”, became final on July 18, 2002. 67 Fed. Reg.
48025 (July 23, 2002). The new regulation provides additional
guidance regarding offers in compromise. T.D. 8829, 1999-2 C.B.
at 235. It does not change the nature of amounts submitted with
an offer in compromise; rather, it makes explicit that those
amounts are considered deposits. Sec. 301.7122-1(h) of the new
regulation.
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