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original debt. The District Court, ruling in favor of the
taxpayer, had reasoned that “‘the taxpayer can’t be pushed back
for years and years and after a settlement is made and have a
forfeiture so to speak, of everything he paid in under that
settlement agreement.’” Id. at 4.
The Court of Appeals for the Fifth Circuit reversed the
District Court, holding that the OIC should be enforced as
written. Id. at 5. It is worth considering the Court of
Appeals’ forceful language in that regard:
In the present case, the contracting parties
expressed their mutual intention in clear and
unmistakable terms. * * * [The OIC] expressly provided
that the Commissioner, upon default by the taxpayer
could terminate the compromise agreement and proceed to
collect the unpaid balance of the original tax
liability. This language is so precise, and the
intention which it manifests is so evident, as to leave
no doubt that the course of action taken by the
Government here was fully authorized by the compromise
agreement.
There was nothing illegal, immoral or inequitable
in the compromise agreement. It did not provide for
any “forfeiture”. By express provision, the amounts to
be paid under the compromise agreement * * * could not
exceed the aggregate amount which the taxpayer conceded
that he owed the Government from the start. By
allowing the Government to revive the taxpayer’s
original liability, the taxpayer will not forfeit the
amounts he has already paid, for those amounts will be
applied to reduce the original liability. The
agreement was precise, it was fair, and it was freely
consented to by the taxpayer. There is no reason why
it should not be enforced as written.
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