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301.7122-1(b)(3)(ii), Proced. & Admin. Regs. Some examples where
a compromise is allowed for purposes of public policy and equity
are: (1) A taxpayer who was hospitalized regularly for a number
of years and was unable, at that time, to manage his financial
affairs and (2) a taxpayer learns at audit that he was given
erroneous advice and is facing additional taxes, penalties, and
additions to tax. Sec. 301.7122-1(c)(3)(iv), Proced. & Admin.
Regs. In addition to the regulations, detailed instructions
concerning offers in compromise are contained in the Internal
Revenue Manual, sections 5.8. Relevant portions are as follows:
Sec. 5.8.11.2.2 (05-15-2004)
Public Policy or Equity Grounds
1. Where there is no Doubt as to Liability (DATL), no
Doubt as to Collectibility (DATC), and the
liability could be collected in full without
causing economic hardship, the Service may
compromise to promote Effective Tax Administration
(ETA) where compelling public policy or equity
considerations identified by the taxpayer provide
a sufficient basis for accepting less than full
payment. Compromise is authorized on this basis
only where, due to exceptional circumstances,
collection in full would undermine public
confidence that the tax laws are being
administered in a fair and equitable manner.
Because the Service assumes that Congress imposes
tax liabilities only where it determines it is
fair to do so, compromise on these grounds will be
rare.
2. The Service recognizes that compromise on
these grounds will often raise the issue of
disparate treatment of taxpayers who can pay
in full and whose liabilities arose under
substantially similar circumstances.
Taxpayers seeking compromise on this basis
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