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and that respondent would waive the additions to tax if
petitioners paid off the total principal balance plus interest.
Consistent with this agreement, petitioners paid in full their
outstanding tax liabilities for the years in issue. Petitioners
allege, however, that respondent did not waive the penalties and
thus failed to comply with the agreement.
Sections 7121 and 7122 and the regulations thereunder set
forth the exclusive means by which closing agreements and
compromises between the Commissioner and a taxpayer concerning
the latter’s tax liability may be accorded finality. Urbano v.
Commissioner, 122 T.C. 384 (2004); Hudock v. Commissioner, 65
T.C. 351, 362 (1975); Rohn v. Commissioner, T.C. Memo. 1994-244;
secs. 301.7121-1, 301.7122-1, Proced. & Admin. Regs. A closing
agreement or compromise must be submitted on special forms
prescribed by the Secretary and is not considered accepted until
the taxpayer is notified of the acceptance in writing. Laurins v.
Commissioner, 889 F.2d 910, 912 (9th Cir. 1989), affg. Norman v.
Commissioner, T.C. Memo. 1987-265; sec. 301.7122-1(d)(1), (3),
Proced. & Admin. Regs.
Petitioners admitted at trial that the purported agreement
was oral and that they do not have any written document or form
to that effect. Based on the record, there was no compliance
with section 7121 or 7122. Accordingly, we hold that petitioners
and respondent did not enter into a binding agreement to waive
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