- 14 -
(2002); see also sec. 301.6330-1(f)(2), Q&A-F5, Proced. & Admin.
Regs. Whether an abuse of discretion has occurred depends upon
whether the exercise of discretion is without sound basis in fact
or law. Freije v. Commissioner, 125 T.C. 14, 23 (2005).
III. Offers in Compromise
Section 7122(a) authorizes the Secretary to compromise any
civil or criminal case arising under the internal revenue laws.
Section 7122(c) authorizes the Secretary to prescribe guidelines
for the officers and employees of the IRS to determine whether an
offer in compromise is adequate. Regulations implementing
section 7122 set forth three grounds for the compromise of a
liability: (1) Doubt as to liability, (2) doubt as to
collectibility, and (3) to promote effective tax administration
(effective tax administration). Sec. 301.7122-1(b), Proced. &
Admin. Regs. Doubt as to liability is not at issue in this case.
Doubt as to collectibility exists in any case where the
taxpayer’s assets and income are less than the full amount of the
liability. Sec. 301.7122-1(b)(2), Proced. & Admin. Regs.
Generally, under respondent’s administrative pronouncements, an
offer to compromise based on doubt as to collectibility will be
acceptable only if the offer reflects the reasonable collection
potential of the case (i.e., that amount, less than the full
liability, that the IRS could collect through means such as
administrative and judicial collection remedies). Rev. Proc.
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