Gary W. McDonough - Page 27

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         transactions into which they enter.  It would be particularly                
         inappropriate for the Government to play that role here, where               
         the transaction at issue is participation in a tax shelter.                  
         Reducing the risks of participating in tax shelters would                    
         encourage more taxpayers to run those risks, thus undermining                
         rather than enhancing compliance with the tax laws.  See Barnes              
         v. Commissioner, supra.                                                      
              C.   Petitioner’s Other Arguments                                       
                   1.   Compromise of Penalties and Interest in an                    
                        ETA Offer-in-Compromise                                       
              Petitioner advances a number of arguments focusing on his               
         assertion that respondent determined that penalties and interest             
         could not be compromised in an ETA offer-in-compromise.                      
         Petitioner argues that such a determination is contrary to                   
         legislative history and is therefore an abuse of discretion.                 
         These arguments are not persuasive.                                          
              The regulations under section 7122 provide that “If the                 
         Secretary determines that there are grounds for compromise under             
         this section, the Secretary may, at the Secretary’s discretion,              
         compromise any civil * * * liability arising under the internal              
         revenue laws”.  Sec. 301.7122-1(a)(1), Proced. & Admin. Regs.  In            
         other words, the Secretary may compromise a taxpayer’s tax                   
         liability if he determines that grounds for a compromise exist.              
         If the Secretary determines that grounds do not exist, the amount            

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