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excess of AMT income over “regular tax income” of very
substantial amounts. The value of the taxpayer’s stock in each
case dropped precipitously after the exercise, and the amount
realized on the later sale of the stock after year 2000 was a
small fraction of the AMTI reported on the respective year 2000
returns, and also a small fraction of the AMT in each case. The
taxpayers in each case thus suffered substantial economic losses
as a result of what might be called phantom income which they
were required to report in 2000 but never in the usual sense
actually received.
Section 7122(c)(1) and (2) provides:
SEC. 7122(c). Standards for Evaluation of Offers.--
(1) In general.--The Secretary shall prescribe
guidelines for officers and employees of the Internal
Revenue Service to determine whether an offer-in-
compromise is adequate and should be accepted to
resolve a dispute.
(2) Allowances for basic living expenses.--
(A) In general.--In prescribing
guidelines under paragraph (1), the Secretary
shall develop and publish schedules of
national and local allowances designed to
provide that taxpayers entering into a
compromise have an adequate means to provide
for basic living expenses.
(B) Use of schedules.--The guidelines
shall provide that officers and employees of
the Internal Revenue Service shall determine,
on the basis of the facts and circumstances
of each taxpayer, whether the use of the
schedules published under subparagraph (A) is
appropriate and shall not use the schedules
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