Roger D. and Mary M. Catlow - Page 13

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          prescribe guidelines to determine when a taxpayer’s offer-in-               
          compromise should be accepted.  The applicable regulations,                 
          section 301.7122-1(b), Proced. & Admin. Regs., list three grounds           
          on which the Commissioner may accept an offer-in-compromise of a            
          Federal tax debt.  These grounds are “Doubt as to liability”,               
          “Doubt as to collectibility”, and to “Promote effective tax                 
          administration”.  Sec. 301.7122-1(b)(1), (2), and (3), Proced. &            
          Admin. Regs.                                                                
               Petitioners argue that respondent was required to compromise           
          their tax liability on the bases of the latter two grounds.  As             
          to the first of these grounds, the Commissioner may compromise a            
          tax liability due to doubt as to collectibility where the                   
          taxpayer’s assets and income are less than the full amount of the           
          assessed liability.  See sec. 301.7122-1(b)(2), Proced. & Admin.            
          Regs.  In such a case, the Commissioner also may accept an offer-           
          in-compromise due to doubt as to collectibility with special                
          circumstances; i.e., the Commissioner may accept an offer of less           
          than the total reasonable collection potential of the case.  See            
          Rev. Proc. 2003-71, sec. 4.02, 2003-2 C.B. 517, 517.  As to the             
          second ground, the Commissioner may compromise a tax liability to           
          promote effective tax administration when collection of the full            
          liability will create economic hardship and the compromise would            
          not undermine compliance with the tax laws by taxpayers in                  
          general.  See sec. 301.7122-1(b)(3)(i), (iii), Proced. & Admin.             






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