Michael D. Cornwell and Hilary J. Iker - Page 9

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               decision to reject the offer in compromise actually                    
               submitted by the taxpayer was arbitrary, capricious, or                
               without sound basis in fact or law.  Skrizowski v.                     
               Commissioner, T.C. Memo. 2004-229; Fowler v.                           
               Commissioner, supra; see Woodral v. Commissioner, 112                  
               T.C. 19, 23 (1999).                                                    
          The proposals presented to Settlement Officer Lin were for less             
          than $25,000 against total liabilities approximating $84,000 as             
          of June 2006.  Petitioners’ proposals were rejected by the                  
          settlement officer, who calculated an acceptable offer by                   
          reference to petitioner’s actual earning history, in accordance             
          with the Internal Revenue Manual.  Petitioners then suggested               
          that overtime pay that had been consistently earned by petitioner           
          should be excluded from the calculation altogether.  That                   
          suggestion does not appear to be reasonable, because petitioner             
          continued to receive overtime pay notwithstanding his employer’s            
          policy.  Petitioners never offered any evidence that petitioner’s           
          actual earnings were declining as a result of the 2004 or                   
          allegedly “new” in 2006 overtime policy.                                    
               Petitioners argue that the settlement officer should have              
          conducted a further investigation before sending the notices of             
          determination.  Respondent points out that the negotiations over            
          petitioners’ long delinquent tax liabilities had gone on for                
          years and that reasonable deadlines had been set and had passed             
          when the notices of determination were sent.  See Murphy v.                 
          Commissioner, supra at 322-323.                                             

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