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incurred as a result of their investment in a tax shelter, it
would be inequitable and against public policy. Petitioners’
argument is not persuasive.
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, petitioners’ 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 petitioners have 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
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