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taxpayers with the tax laws.12 Sec. 301.7122-1(b)(3), Proced. &
Admin. Regs.
Petitioners proposed an offer-in-compromise based on
effective tax administration. Petitioners offered to pay
$346,258 to compromise their outstanding tax liabilities for 1980
through 1996, which totaled $750,740 at the time of the section
6330 hearing.13 Petitioners argued that exceptional
circumstances existed such that collection of the full liability
would undermine public confidence that the tax laws are being
administered in a fair and equitable manner. Respondent
determined that petitioners’ reasonable collection potential was
$1,287,552 and that their offer-in-compromise did not meet the
criteria for an effective tax administration offer-in-compromise.
12 The regulations also provide that the Secretary may
compromise a liability on the ground of effective tax
administration when collection of the full liability will create
economic hardship. See sec. 301.7122-1(b), Proced. & Admin.
Regs. Respondent determined that petitioners were not entitled
to an offer-in-compromise based on economic hardship. While
petitioners dispute Ms. Cochran’s determination of their
reasonable collection potential, they do not argue that
collection of the full liability would create economic hardship.
13 The proposed collection action related to petitioners’
outstanding tax liability for 1980-85, 1989, and 1990 only.
Petitioners estimated that their outstanding tax liability for
those periods was $474,655. However, petitioners sought to
compromise their outstanding tax liability for not only those
periods, but also for 1986-88 and 1991-96. To accurately compare
their offer amount to their outstanding tax liability, we must
therefore consider the total assessed amount for 1980-96, and not
for only 1980-85, 1989 and 1990.
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