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The regulations under section 7122 set forth three grounds
for the compromise of a tax liability: (1) Doubt as to
liability; (2) doubt as to collectibility; or (3) promotion of
effective tax administration. Sec. 301.7122-1(b), Proced. &
Admin. Regs. Doubt as to liability is not at issue in this
case.9
The Secretary may compromise a tax liability based on doubt
as to collectibility where the taxpayer’s assets and income are
less than the full amount of the assessed liability. Sec.
301.7122-1(b)(2), Proced. & Admin. Regs. Generally, under the
Commissioner’s administrative pronouncements, an offer-in-
compromise based on doubt as to collectibility will be acceptable
only if it reflects the taxpayer’s reasonable collection
potential. Rev. Proc. 2003-71, sec. 4.02(2), 2003-2 C.B. 517,
517. In some cases, the Commissioner will accept an offer-in-
compromise of less than the reasonable collection potential if
there are “special circumstances”. Id. Special circumstances
are: (1) Circumstances demonstrating that the taxpayer would
suffer economic hardship if the IRS were to collect from him an
amount equal to the reasonable collection potential; or (2)
circumstances justifying acceptance of an amount less than the
9 While petitioner disputes his liability for sec. 6621(c)
interest, he did not raise doubt as to liability as a grounds for
compromise, neither on his Form 656 nor during the sec. 6330
hearing.
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