Donald and Yvonne Clayton - Page 14

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               Petitioners argue that respondent was required to compromise           
          their tax liability to promote effective tax administration.  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. Regs.  If a taxpayer           
          does not qualify for effective tax administration compromise on             
          grounds of economic hardship, the regulations also allow the                
          Commissioner to compromise a tax liability to promote effective             
          tax administration when the taxpayer identifies compelling                  
          considerations of public policy or equity.  See sec. 301.7122-              
          1(b)(3)(ii), Proced. & Admin. Regs.                                         
               Cochran determined that petitioners’ reasonable collection             
          potential was either $546,417 or $431,417.  Under either                    
          calculation, petitioners can afford to pay their estimated                  
          approximately $275,000 tax liability and therefore only qualify             
          for an offer-in-compromise to promote effective tax                         
          administration.  See sec. 301.7122-1(b)(3), Proced. & Admin.                
          Regs.; cf. Fargo v. Commissioner, 447 F.3d 706 (9th Cir. 2006)              
          (taxpayers made an offer-in-compromise to promote effective tax             
          administration where they had sufficient assets to pay their tax            
          liability in full).                                                         







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