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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 with special
circumstances or effective tax administration. Petitioners
offered to pay $99,851 to compromise their outstanding tax
liabilities for 1981 through 1996, which totaled $187,041 at the
time of the section 6330 hearing.12 Petitioners argued that
collection of the full liability would create economic hardship
and would undermine public confidence that the tax laws are being
administered in a fair and equitable manner. Respondent
determined that petitioners’ reasonable collection potential was
$380,706 and that their offer-in-compromise did not meet the
criteria for an offer-in-compromise based on either doubt as to
12 The proposed collection action related to petitioners’
outstanding tax liability for 1981-88 only. Petitioners
estimated that their outstanding tax liability for 1981-88 was
$143,911. However, petitioners sought to compromise their
outstanding tax liability for not only 1981-88, but also for
1989-96. To accurately compare their offer amount to their
outstanding tax liability, we must therefore consider the total
assessed amount for 1981-96, and not for only 1981-88.
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