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underlying tax liability for 1999 in this proceeding. See Goza
v. Commissioner, 114 T.C. at 180-181. Because the underlying tax
liability is not properly at issue, we review for abuse of
discretion, respondent’s determination to proceed with collection
of petitioners’ 1999 tax liability. Id. at 182. Accordingly, we
must decide whether respondent exercised his discretion
arbitrarily, capriciously, or without sound basis in fact or law.
Woodral v. Commissioner, 112 T.C. 19, 23 (1999); see also Fargo
v. Commissioner, T.C. Memo. 2004-13.
D. Offer-in-Compromise
During the Appeals Office hearing, Ms. Cahill informed
petitioners that they could submit an offer-in-compromise as a
collection alternative. Following the hearing, Ms. Cahill
provided petitioners with the necessary forms to file.
Petitioners submitted to Ms. Cahill Form 656. However,
petitioners failed to submit both Form 433-A and the filing fee.
Ms. Cahill notified petitioners that the offer-in-compromise
could not be processed without these items. At no time did
petitioners submit either of these items.
The Commissioner will not process an offer-in-compromise
that lacks sufficient financial information to evaluate its
acceptability. See sec. 301.7122-1(d)(2), Proced. & Admin.
Regs.; see also Rodriguez v. Commissioner, T.C. Memo. 2003-153.
Petitioners failed to submit to respondent the required financial
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