Gordon and Ilene Freeman - Page 9

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               In response to the notice of determination, petitioners                
          filed a petition with this Court on December 20, 2004.                      
                                       OPINION                                        
               Section 7122(a) provides that “The Secretary may compromise            
          any civil * * * case arising under the internal revenue laws”.              
          Whether to accept an offer-in-compromise is left to the                     
          Secretary’s discretion.  Fargo v. Commissioner, 447 F.3d 706, 712           
          (9th Cir. 2006), affg. T.C. Memo. 2004-13; sec. 301.7122-1(c)(1),           
          Proced. & Admin. Regs.                                                      
               The regulations under section 7122(a) 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 and doubt as to                         
          collectibility are not at issue in this case.11                             
               As pertinent here, the Secretary may compromise a tax                  
          liability on the ground of effective tax administration when:               
          (1) 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             
          (2) compromise of the liability would not undermine compliance by           



               11  While petitioners contest their liability for sec.                 
          6621(c) interest, see supra note 2, they did not raise doubt as             
          to liability as a basis for their offer-in-compromise.                      





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