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In sum, we find that respondent did not abuse his discretion
in rejecting petitioners’ offers-in-compromise.
III. Underlying Liability
To the extent the Court does not compel respondent to accept
their original offer-in-compromise, petitioners argue in the
alternative that respondent’s assessment of penalties and
interest while their bankruptcy petition was pending was
erroneous. Petitioners also argue that respondent erroneously
applied the bankruptcy proceeds to the individual employment tax
liabilities of Claude Salazar instead of their joint income tax
liabilities.
In a collection review proceeding, a taxpayer may raise
challenges to the existence or amount of the underlying liability
for any tax period if the person did not receive any statutory
notice of deficiency for such tax liability or did not otherwise
have an opportunity to dispute the underlying liability. Sec.
6330(c)(2)(B). Where a taxpayer has filed a bankruptcy action,
and the Commissioner has submitted a proof of claim for unpaid
Federal tax liabilities in a taxpayer’s bankruptcy action, we
have held that the taxpayer has had the opportunity to dispute
the liabilities for purposes of section 6330(c)(2)(B). See
Kendricks v. Commissioner, 124 T.C. 69 (2005); Sabath v.
Commissioner, T.C. Memo. 2005-222. A bankruptcy court may
consider the amount or legality of taxes, including penalties and
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