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respondent’s use in this case of the prior policy for installment
agreements.
Offer in Compromise
Section 7122 provides authority for an offer in compromise
as an alternative to collection action. An offer in compromise
reduces a taxpayer’s overall liability. An offer in compromise
may be granted for reasons such as doubt as to the actual tax
liability, doubt as to collectibility, or for other purposes
relating to effective tax administration. Sec. 7122.
As indicated, petitioners do not dispute the amount of the
cumulative liability. The proposed offer in compromise was
considered on the grounds of doubt as to collectibility. In
general, an offer in compromise based on doubt as to
collectibility may be accepted where there are substantial
questions concerning whether the tax liability will be collected
in full and where the offered amount reflects realistic
collection potential. 2 Administration, Internal Revenue Manual
(CCH), sec. 5.8.1.1.3, at 16,253 (2001).
After reviewing the initial financial information provided
by petitioners, the settlement officer suggested that
petitioners’ proposed offer in compromise of $180 a month for 116
months, for a total of $20,880, appeared acceptable. However, as
explained above, the settlement officer’s verification of
petitioners’ financial information uncovered a significant
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