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bankruptcy petition was pending and has agreed to correct this
error. Because we find respondent did not abuse his discretion
in rejecting petitioners’ offers-in-compromise, and because we
find that respondent did not otherwise erroneously assess
penalties and interest, we sustain respondent’s determinations.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulations of facts and related exhibits are incorporated
herein by this reference. At the time the petitions were filed,
petitioners, husband and wife, resided in New York.
Previously, petitioners were residents of Nevada, where they
owned and operated a retail art gallery named Artistic Nature.
While operated by both petitioners, the gallery was organized as
a sole proprietorship in the name of Mr. Salazar. The operation,
and ultimately the failure, of Artistic Nature has led to the
current proceedings. Respondent seeks collection of petitioners’
outstanding Federal income taxes, penalties, and interest for
taxable years 1997, 1998, and 1999. Respondent also seeks to
collect the outstanding employment tax liabilities of Mr. Salazar
related to Artistic Nature from 1998 through 2001.
On January 23, 2001, when Artistic Nature was failing,
petitioners filed for chapter 13 bankruptcy protection in the
U.S. Bankruptcy Court for the District of Nevada. Petitioners
captioned their bankruptcy petition as “Claude E. Salazar dba
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