Roger and Lora Carter - Page 14

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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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