William H. and Jo Anne Lindley - Page 14

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               The Secretary may compromise a tax liability on the ground             
          of effective tax administration when:  (1) Collection of the full           
          liability will create economic hardship; or (2) exceptional                 
          circumstances exist such that collection of the full liability              
          would undermine public confidence that the tax laws are being               
          administered in a fair and equitable manner; and (3) compromise             
          of the liability would not undermine compliance by taxpayers with           
          the tax laws.  Sec. 301.7122-1(b)(3), Proced. & Admin. Regs.                
               Petitioners proposed an offer-in-compromise based                      
          alternatively on doubt as to collectibility, doubt as to                    
          collectibility with special circumstances, or effective tax                 
          administration.  Petitioners formally offered to pay $40,413 to             
          compromise their outstanding tax liabilities for 1987 through               
          1995 and later increased their offer amount to $150,000.10                  
          Respondent determined that petitioners abandoned their doubt as             
          to collectibility with special circumstances and effective tax              
          administration arguments and that, because they had the ability             
          to pay the currently assessed tax in full, they are not entitled            
          to an offer-in-compromise based on doubt as to collectibility.              



               10  The proposed collection action related to petitioners’             
          outstanding tax liability for 1987-90 only.  However, petitioners           
          also sought to compromise their outstanding tax liability for               
          1991-95.  The total assessed amount for 1987-95 is not in the               
          record, and, therefore, no reliable comparison can be made                  
          between the offer amount and the amount assessed.                           





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