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prescribe guidelines to determine when a taxpayer’s offer-in-
compromise should be accepted. The applicable regulations,
section 301.7122-1(b), Proced. & Admin. Regs., list three grounds
on which the Commissioner may accept an offer-in-compromise of a
Federal tax debt. These grounds are “Doubt as to liability”,
“Doubt as to collectibility”, and to “Promote effective tax
administration”. Sec. 301.7122-1(b)(1), (2), and (3), Proced. &
Admin. Regs.
Petitioners argue that respondent was required to compromise
their tax liability on the bases of the latter two grounds. As
to the first of these grounds, the Commissioner may compromise a
tax liability due to doubt as to collectibility where the
taxpayer’s assets and income are less than the full amount of the
assessed liability. See sec. 301.7122-1(b)(2), Proced. & Admin.
Regs. In such a case, the Commissioner also may accept an offer-
in-compromise due to doubt as to collectibility with special
circumstances; i.e., the Commissioner may accept an offer of less
than the total reasonable collection potential of the case. See
Rev. Proc. 2003-71, sec. 4.02, 2003-2 C.B. 517. As to the second
ground, the Commissioner may compromise a tax liability to
promote effective tax administration when collection of the full
liability will create economic hardship and the compromise would
not undermine compliance with the tax laws by taxpayers in
general. See sec. 301.7122-1(b)(3)(i), (iii), Proced. & Admin.
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