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to-pay 220% tax rate or 11x the tax required of a
similarly situated taxpayer–-an unintended result not
consistent with the legislative purpose of Congress for
any internal revenue law. In such a special case,
Congress intended that the OIC Statute would operate to
step in and provide relief from this unintended and
unfair tax liability arising from unintended results
arising from the literal application of the internal
revenue laws (in this case, the AMT ISO Statute).
Petitioners contend that there was an abuse of discretion
because:
The IRS failed to consider (or if it did consider it
failed to properly consider), under the principles and
processes laid out in Section 7122, corresponding
regulations 26 CFR 301.7122, and the corresponding IRM
provisions, the special circumstances raised by the
Speltzes in their offer in compromise.
Petitioners argue that “under their special circumstances
the tax liability being imposed on them is unfair and
inequitable, a situation for which Congress has fashioned a
remedy in the law--Section 7122.” The crux of petitioners’
position is that section 7122 “trumps” the literal application of
statutes imposing a tax in their situation and that, therefore,
it was an abuse of discretion by the Appeals Office not to accept
their offer in compromise.
Respondent, on the other hand, contends that the Appeals
officer correctly applied the statute, the regulations, and the
Internal Revenue Manual provisions. For the reasons explained
below, we agree with respondent.
The unfortunate consequences of the AMT in various
circumstances have been litigated since shortly after the
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