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offer-in-compromise. Petitioners argue that such a determination
is contrary to legislative history and is therefore an abuse of
discretion. These arguments are not persuasive.
The regulations under section 7122 provide that “If the
Secretary determines that there are grounds for compromise under
this section, the Secretary may, at the Secretary’s discretion,
compromise any civil * * * liability arising under the internal
revenue laws”. Sec. 301.7122-1(a)(1), Proced. & Admin. Regs. In
other words, the Secretary may compromise a taxpayer’s tax
liability if he determines that grounds for a compromise exist.
If the Secretary determines that grounds do not exist, the amount
offered (or the way in which the offer is calculated) need not be
considered.
Petitioners’ arguments regarding the compromise of penalties
and interest do not relate to whether there are grounds for a
compromise. Instead, these arguments go to whether the amount
petitioners offered to compromise their tax liability was
acceptable. As addressed above, respondent’s determination that
the facts and circumstances of petitioners’ case did not warrant
acceptance of their offer-in-compromise was not arbitrary or
capricious and was thus not an abuse of discretion. Because no
grounds for compromise exist, we need not address whether
respondent can or should compromise penalties and interest in an
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