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bankruptcy and the effect accepting a compromise would have on
respondent’s distribution. Ultimately, Mr. Conte concluded that
respondent was likely to receive approximately $20,000 of the
$25,000 remaining in the bankruptcy. Further, as advised by
counsel, Mr. Conte concluded that accepting the offer-in-
compromise risked respondent’s claims in the bankruptcy estate.
Thus, in accordance with the IRM and advice from counsel, Mr.
Conte determined that petitioners’ offer-in-compromise was
inadequate because it was less than what respondent expected to
receive from the bankruptcy trustee and because accepting that
offer would place that distribution at risk.
Petitioners argue that respondent’s rejection of the offer-
in-compromise was based on an erroneous conclusion of law that
the bankruptcy distribution was at risk. Petitioners argue that
respondent’s distribution from the bankruptcy was never at risk.
If respondent’s determination was based upon an erroneous
conclusion of law, we must reject that view and find that
respondent abused his discretion. See Swanson v. Commissioner,
121 T.C. 111, 119 (2003).
As respondent’s counsel now explains, an offer-in-compromise
must include all of the outstanding liabilities of the taxpayer.
Further, section 6325(a) provides that the Commissioner “shall
issue a certificate of release of any lien imposed with respect
to any internal revenue tax” not later than 30 days after the
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Last modified: March 27, 2008