- 13 -
Fiscal Responsibility Act of 1982 (TEFRA). After
issuance of the Final Partnership Administrative
Adjustment (FPAA), but prior to any proceedings in Tax
Court, the IRS made a global settlement offer in which
it offered to concede a substantial portion of the
interest and penalties that could be expected to be
assessed if the IRS’s determinations were upheld by the
court. The taxpayer rejected the settlement offer.
After several years of litigation, the partnership
level proceeding eventually ended in Tax Court
decisions upholding the vast majority of the
deficiencies asserted in the FPAA on the grounds that
the partnership’s activities lacked economic substance.
The taxpayer has now offered to compromise all the
penalties and interest on terms more favorable than
those contained in the prior settlement offer, arguing
that TEFRA is unfair and that the liabilities accrued
in large part due to the actions of the Tax Matters
Partner (TMP) during the audit and litigation. Neither
the operation of the TEFRA rules nor the TMP’s actions
on behalf of the taxpayer provide grounds to compromise
under the equity provision of paragraph (b)(4)(i)(B) of
this section. Compromise on those grounds would
undermine the purpose of both the penalty and interest
provisions at issue and the consistent settlement
principles of TEFRA. * * *
1 Administration, Internal Revenue Manual (CCH), sec.
5.8.11.2.2(3), at 16,378.
In the supplemental notice of determination, respondent
states:
We have also considered the provision of the Internal
Revenue Manual (IRM) Section 5.8.11.2.2, Example 2.
This example involves circumstances similar to the
circumstances presented in the taxpayer’s case. From
this example, it is clear the government does not
consider on [sic] offers like this to acceptable [sic]
under ETA considerations.
We agree with respondent that the example presents similar
circumstances to those in petitioner’s case. The similarities
include: Petitioner’s outstanding tax liability is related to
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011