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2003-71, sec. 4.02(2), 2003-2 C.B. 517. The offer must include
all unpaid tax liabilities and periods for which the taxpayer is
liable. Internal Revenue Manual (IRM) pt. 5.8.1.7 (Sept. 1,
2005) (Liabilities to be Compromised).2 In some cases, the
Secretary will accept an offer of less than the reasonable
collection potential of the case if there are special
circumstances. Rev. Proc. 2003-71, supra. Special circumstances
are (1) circumstances demonstrating that the taxpayer would
suffer economic hardship if the IRS were to collect from him an
amount equal to the reasonable collection potential of the case
or (2) if no demonstration of such suffering can be made,
circumstances justifying acceptance of an amount less than the
reasonable collection potential of the case based on public
policy or equity considerations. IRM pt. 5.8.4.3.4 (Sept. 1,
2005) (Effective Tax Administration and Doubt as to
Collectibility with Special Circumstances). To demonstrate that
compelling public policy or equity considerations justify a
compromise, the taxpayer must be able to demonstrate that, due to
exceptional circumstances, collection of the full liability would
undermine public confidence that the tax laws are being
2 All citations to the Internal Revenue Manual are to the
manual as found at http://www.irs.gov/irm/index.html (last
visited Dec. 27, 2005).
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