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Commissioner. General contract principles as expressed in the
Restatement of Contracts should control these determinations.
Second, an offer-in-compromise is an agreement between the
taxpayer and the Government which settles a tax liability for
payment of less than the full amount owed. 2 Administration,
Internal Revenue Manual (CCH), sec. 5.8.1.1.1, at 16,253. In the
case at bar, petitioner paid $100,000 to compromise individual
income tax and statutory additions totaling $989,475. Majority
op. p. 3. By defaulting petitioner, respondent now seeks to
collect the remaining sums previously compromised.
Noncompliance with the terms of the offer-in-compromise does
not automatically result in the offer’s being defaulted. As 2
Administration, Internal Revenue Manual (CCH), sec. 5.19.7.3.22,
at 18,507 (Defaults) states:
(1) When a taxpayer fails to meet any term of an offer,
the offer may be defaulted and all liabilities reinstated.
Any of the following may result in a default of the offer.
* * * * * * *
• Failure to timely file subsequent tax returns and pay
all taxes due during the compliance period.
The Internal Revenue Manual further states that “If the taxpayer
does not comply with the provisions of the offer in compromise,
the offer may be considered in default.” 4 Administration,
Internal Revenue Manual (CCH), sec. 8.13.2.5.4, at 27,581
(Actions on Defaulted Offers) (emphasis added).
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