Stanley R. Harbaugh and Bonnie L. Harbaugh - Page 8

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          When the first and second calls were made, a liability could                
          be compromised only if there was doubt as to liability or doubt             
          as to collectibility.6  Sec. 301.7122-1(a), Proced. & Admin.                
          Regs.  Petitioners’ liability was not in doubt at the time of the           
          “agreement” because petitioners had filed the tax returns                   
          calculating the taxes due and were not contesting the accuracy of           
          the returns.  Petitioners have not established that they                    
          delivered any financial statements or other evidence of their               
          financial situation to the IRS at the time of the first call                
          indicating doubt as to collectibility.  Thus, the evidence does             
          not demonstrate that a valid basis existed for compromising                 
          petitioners’ tax liabilities.                                               
          The regulations also required offers in compromise to be                    
          submitted on “forms prescribed by the Internal Revenue Service”.            
          Sec. 301.7122-1(d)(1), Proced. & Admin. Regs.  An offer is                  
          accepted “only when the proponent thereof is so notified in                 
          writing.”  Sec. 301.7122-1(d)(3), Proced. & Admin. Regs.; see               
          also Ringgold v. Commissioner, supra.  Petitioners did not submit           
          a written offer in compromise to the IRS.  They also do not claim           
          to have received a written acceptance of the purported agreement            
          from the IRS.  Without satisfaction of these procedural elements,           
          we cannot find that a valid compromise was made.                            

               6 In response to the enactment in 1998 of sec. 7122(c), the            
          regulations were changed to add a third basis for compromise.               

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