Gary W. McDonough - Page 25

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              While the regulations do not set forth a specific standard              
         for evaluating an offer-in-compromise based on claims of public              
         policy or equity, the regulations contain two examples.  See sec.            
         301.7122-1(c)(3)(iv), Examples (1) and (2), Proced. & Admin.                 
         Regs.  The first example describes a taxpayer who is seriously               
         ill and unable to file income tax returns for several years.  The            
         second example describes a taxpayer who received erroneous advice            
         from the Commissioner as to the tax effect of the taxpayer’s                 
         actions.  Neither example bears any resemblance to this case.                
         Unlike the exceptional circumstances exemplified in the                      
         regulations, petitioner’s situation is neither unique nor                    
         exceptional in that his situation mirrors those of numerous other            
         taxpayers who claimed tax shelter deductions in the 1980s and                
         1990s.  See Keller v. Commissioner, T.C. Memo. 2006-166; Barnes              
         v. Commissioner, T.C. Memo. 2006-150.                                        
              Of course, the examples in the regulations are not meant to             
         be exhaustive, and petitioner has a more sympathetic case than               
         the taxpayers in Fargo v. Commissioner, 447 F.3d at 714, for whom            
         the Court of Appeals for the Ninth Circuit noted that “no                    
         evidence was presented to suggest that Taxpayers were the subject            
         of fraud or deception”.  Such considerations, however, have not              
         kept this Court from finding investors in the Hoyt tax shelters              
         to be liable for penalties and interest, nor have they prevented             
         the Courts of Appeals for the Sixth and Tenth Circuits from                  

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Last modified: May 25, 2011