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Petitioner and Mr. Sturges filed an offer-in-compromise in
an attempt to compromise their 2000 tax liability for $1 on
October 22, 2001. On January 17, 2002, petitioner informed the
revenue officer who was considering the offer-in-compromise that
she had unsuccessfully tried to refinance the residence in order
to raise the money to pay the tax. On January 23, 2002, with the
offer-in-compromise still under consideration, petitioner and Mr.
Sturges borrowed $115,000, increasing the mortgage debt to
$477,000. They used the borrowed funds to pay the debt on their
credit cards and their daughter’s college tuition. The IRS
rejected the offer-in-compromise on or about April 23, 2002.
On June 19, 2002, petitioner filed a Form 8857, Request for
Innocent Spouse Relief, and petitioner and Mr. Sturges filed
separate offers in compromise offering to compromise their 2000
tax liability for $200 and $1,000, respectively. The offers in
compromise were rejected on August 19, 2002.
On August 9, 2002, respondent sent petitioner a letter
acknowledging receipt of petitioner’s request for innocent spouse
relief and providing information on the claim process.
Respondent included Publication 971, Innocent Spouse Relief,
which explained the requirements for relief in detail, and a
questionnaire to be completed by petitioner. The letter also
informed petitioner that respondent was required to inform Mr.
Sturges that petitioner had requested relief and that a separate
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