Thomas E. Johnston and Thomas E. Johnston, Successor in Interest to Shirley L. Johnston, Deceased - Page 11

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          adjustments” prohibits taxpayers from including in the offered              
          amount any items that were not in dispute at the time the                   
          qualified offer was made.                                                   
               Respondent argues that petitioners misinterpret the                    
          regulatory language.  Respondent argues that the plain language             
          of the third requirement, which provides that the offered amount            
          be that amount which will fully resolve the taxpayer’s liability,           
          prevents taxpayers from raising new issues once a qualified offer           
          is accepted.  Hence, respondent argues that petitioners’                    
          interpretation of the second requirement conflicts with the third           
          requirement.  As an alternative to petitioners’ interpretation of           
          the second requirement, respondent argues that the second                   
          requirement is primarily concerned with the consequences of the             
          rejection of a qualified offer.  As respondent notes, if new                
          issues are raised after the rejection of a qualified offer, the             
          amount of liability attributable to those new issues is not                 
          considered when comparing the amount of an eventual judgment to             
          the amount of the last qualified offer.  Sec. 7430(c)(4)(E); sec.           
          301.7430-7T(b)(3), Temporary Proced. & Admin. Regs., 66 Fed. Reg.           
          727 (Jan. 4, 2001).                                                         
               Respondent argues that, in order to comply with the third              
          requirement, if petitioners wanted to apply the NOLs to reduce              

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Last modified: May 25, 2011