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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 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
reasonable collection potential of the case based on public
policy or equity considerations. See Internal Revenue Manual
(IRM) sec. 5.6.4.3(4). However, in accordance with the
Commissioner’s guidelines, an offer-in-compromise based on doubt
as to collectibility with special circumstances should not be
accepted, even when economic hardship or considerations of public
policy or equity circumstances are identified, if the taxpayer
does not offer an acceptable amount. See IRM sec. 5.8.11.2.1(11)
and .2(12).
The Secretary may also compromise a tax liability on the
ground of effective tax administration when: (1) Collection of
the full liability will create economic hardship; or (2)
exceptional circumstances exist such that collection of the full
liability would undermine public confidence that the tax laws are
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