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On various occasions during the process before Appeals,
petitioner communicated an interest in pursuing an offer in
compromise. Section 7122(a), as pertinent here, authorizes the
Secretary to compromise any civil case arising under the internal
revenue laws. Regulations promulgated under section 7122 set
forth three grounds for compromise of a liability: (1) Doubt as
to liability, (2) doubt as to collectibility, or (3) promotion of
effective tax administration. Sec. 301.7122-1(b), Proced. &
Admin. Regs.2 With respect to the third-listed ground, a
compromise may be entered to promote effective tax administration
where: (1)(a) Collection of the full liability would cause
economic hardship; or (b) exceptional circumstances exist such
that collection of the full liability would undermine public
confidence that the tax laws are being administered in a fair and
equitable manner; and (2) compromise will not undermine
2 Sec. 301.7122-1, Proced. & Admin. Regs., contains an
effective date provision stating that the section applies to
offers in compromise pending on or submitted on or after July 18,
2002. Sec. 301.7122-1(k), Proced. & Admin. Regs. Previous
temporary regulations by their terms apply to offers in
compromise submitted on or after July 21, 1999, through July 19,
2002. Sec. 301.7122-1T(j), Temporary Proced. & Admin. Regs., 64
Fed. Reg. 39027 (July 21, 1999). The final and temporary
regulations do not differ materially in substance in any way
relevant here, and temporary regulations are entitled to the same
weight and binding effect as final regulations. Peterson Marital
Trust v. Commissioner, 102 T.C. 790, 797 (1994), affd. 78 F.3d
795 (2d Cir. 1996). For simplicity and convenience, the final
regulations are cited.
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