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Commissioner stands to collect as a creditor in the bankruptcy
proceeding in addition to possibly collecting from the taxpayer
directly from future income and assets not subject to the
bankruptcy.
Thus, at first, the IRM instructs a settlement officer to
consider the Commissioner’s standing as a creditor in the
bankruptcy and advises that an acceptable offer-in-compromise
include the amount the Commissioner reasonably expects to recover
from the bankruptcy. 1 Administration, IRM (CCH), pt.
5.8.10.2.3(2). In other words, the Appeals officer should not
accept an offer of $5 when doing so will risk the likely receipt
of $10 down the road. Second, the IRM instructs that an
acceptable offer-in-compromise should also include the amount
that “can be collected from the taxpayer on non-discharged
liabilities or from property outside the bankruptcy.” Id. Thus,
if the Commissioner stands to receive $10 as a creditor in the
bankruptcy and, in addition, $5 can be collected directly from
the taxpayer, then the reasonable collection potential is not $5
or even $10, but more like $15.
Mr. Conte did not have to reach the second part of this
analysis––the amount respondent could collect from petitioners
outside of the bankruptcy. The $9,024.25 offer-in-compromise
from petitioners was less than the $20,000 Mr. Conte expected
respondent would receive from the bankruptcy, and he determined
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Last modified: March 27, 2008