- 12 -
Petitioner’s second contention is that respondent abused his
discretion in rejecting petitioner’s offer-in-compromise on the
basis of doubt as to its collectibility.
Section 7122(a) authorizes the Secretary to compromise any
civil case arising under the internal revenue laws and requires
him to prescribe guidelines for officers and employees of the
IRS to determine whether an offer-in-compromise is adequate and
should be accepted to resolve a dispute. Sec. 7122(a), (c)(1).
The contemplated guidelines and schedules pertaining to
evaluating offers-in-compromise on the basis of collectibility
have been published in the regulations interpreting section 7122.
See sec. 301.7122-1(c)(2), Proced. & Admin. Regs.; 1
Administration, Internal Revenue Manual (CCH), sec. 5.8.4.4 at
16,306. Under this administrative guidance, the Secretary will
generally compromise a liability on the basis of doubt as to
collectibility only if the liability exceeds the taxpayer’s
reasonable collection potential. Cf. Murphy v. Commissioner, 125
T.C. 301, 308-310 (2005), affd. 469 F.3d 27 (1st Cir. 2006). A
taxpayer’s reasonable collection potential is determined, in
part, using the published guidelines for certain national and
local allowances for basic living expenses and essentially
treating income and assets in excess of those needed for basic
living expenses as available to satisfy Federal income tax
liabilities. See 2 Administration, Internal Revenue Manual
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: November 10, 2007