Acceptance by IRS of Offer in Compromise - section 7122


The following is a series of cases dealing with when an Offer in Compromise is accepted by the IRS

An IRS Appeals officer did not abuse her discretion when she refused a corporation's offer-in-compromise regarding its unpaid employment taxes. Her rejection of the offer as nonprocessable and inadequate was in accordance with the Internal Revenue Code and Treasury regulations. The corporation was not current on the payment of its estimated tax for the prior two periods. Its failure to timely pay taxes owed was a reasonable basis for the Appeals officer to reject its offer-in-compromise relating to other unpaid taxes.

Christopher Cross, Inc., CA-5, 2006-2 USTC ¶50,524, 461 F3d 610.

The IRS did not abuse its discretion by refusing to accept a couple's offer in compromise on an alternative minimum tax liability they incurred for exercising incentive stock options.

R.J. Speltz, CA-8, 2006-2 USTC ¶50,403.

An Appeals officer's determination to reject an individual's offer in compromise and sustain a levy to collect trust fund recovery penalties was not an abuse of discretion. The record established that the determination complied with all the requirements of the Internal Revenue Code and the Treasury Regulations. Moreover, the Appeals officer sustained the levy only after a complete review of the individual's financial information and after determining that the individual's offer in compromise was insufficient. The taxpayer conceded that IRS was not required to negotiate an acceptable offer in compromise.

R.E. Marshall, DC Fla., 2007-2 USTC ¶50,802.

The IRS was not liable for a breach of contract claim with respect to a settlement agreement because the individual bringing suit failed to show the existence of an enforceable contract to settle his outstanding tax liabilities. The IRS agent's written reply to the individual's offer did not constitute a valid offer or counteroffer that could be accepted by the individual to create a binding contract with the IRS. Moreover, the IRS agent was not authorized to enter into any such contract with the individual.

D.W. Jordan, FedCl, 2007-2 USTC ¶50,601.

The government was not estopped from collecting an individual's unpaid taxes merely because he alleged that an IRS employee advised or enticed him to file offers-in-compromise relating to his tax liabilities.

J.C. Ryals, DC Fla., 2006-1 USTC ¶50,293.

The IRS could not be compelled to accept an offer in compromise submitted by a company after the commencement of a bankruptcy proceeding but before the filing of a proposed Chapter 11 plan.Rev. Proc. 2003-71, 2003-2 CB 517, which directs IRS personnel to treat any offer in compromise as nonprocessable if the taxpayer has a bankruptcy case pending, does not violate a clear nondiscretionary duty on the part of the IRS.

1900 M Restaurant Associates, Inc., BC-DC D.C., 2005-1 USTC ¶50,313, 319 BR 302.

The IRS did not abuse its discretion in refusing to accept an individual's multiple offers to compromise her liability for the trust fund recovery penalty. The taxpayer's first offer was for significantly less than her collection potential, and she failed to explain why the IRS's two counter offers would pose a hardship. In calculating its counter offers, the IRS took into consideration the taxpayer's age and numerous medical problems. The IRS also offered to forgo collection until the taxpayer's financial situation improved, or the collection action expired. The taxpayer made the second offer at a Collection Due Process (CDP) hearing, arguing that there was doubt as to her liability for the penalty.

A. Siquieros, DC Tex., 2005-1 USTC ¶50,244. Aff'd, per curiam, CA-5 (unpublished opinion), 2005-1 USTC ¶50,245, 124 FedAppx 279.

A taxpayer was not entitled to monetary damages resulting from the IRS's referral of a collection action against the taxpayer to the Department of Justice (DOJ) while one or more offers in compromise were allegedly pending. The IRS's referral of the taxpayer's case to the DOJ predated temporary regulations precluding any levy to collect outstanding tax debts while an offer in compromise for those tax debts is pending and final regulations, Reg. §301.7122-1(g)(6), prohibiting the referral of cases to the DOJ for the collection of unpaid taxes through judicial proceedings while an offer in compromise is pending. The IRS's failure to include provisions preventing referral of such cases to the DOJ in the temporary regulations was not actionable under the Taxpayer Bill of Rights (P.L. 104-168), as codified under Code Sec. 7433(a). There was also no proof that there were any offers in compromise pending when the taxpayer's case was referred to the DOJ. At least six offers in compromise submitted by the taxpayer were rejected or returned as "unprocessable." Documents evidencing the IRS's acceptance of an offer in compromise submitted by the taxpayer's accountant on behalf of the taxpayer were forgeries.

J.R. Evseroff, DC N.Y., 2005-1 USTC ¶50,112.

Married debtors' tender of a check to the government did not constitute an offer in compromise that would have discharged their tax liability. The government and the debtors agreed that an offer to compromise the tax liability of the debtors was never accepted in writing by an authorized official. Moreover, a certificate of assessment reflected that the debtors' offer in compromise was rejected.

L.M. Smallwood, BC-DC Ark., 2002-1 USTC ¶50,166.

A proposed tax levy and collection action against an individual was not barred because the government failed to entertain a settlement or other compromise of her liability. The taxpayer failed to assert any Internal Revenue Code provision that establishes the government's legal obligation to compromise its action against her. The government has discretion to accept or reject any offer in compromise of a tax liability but is not legally obligated to even consider such an offer.

D.G. Asbury, DC Pa., 2002-1 USTC ¶50,117.

A Cayman Islands corporation's suit for refund of federal withholding taxes was dismissed, with prejudice, in accordance with a closing agreement with the government. A letter sent by the taxpayer that purported to modify its settlement offer to include an offer-in-compromise with regard to tax years not at issue was ineffective. The taxpayer presented no evidence that the proper parties received the letter before the government accepted its offer.

Inverworld, Ltd., DC D.C., 2001-1 USTC ¶50,350. Aff'd, per curiam, CA-D.C. (unpublished opinion), 2002-1 USTC ¶50,113, 22 FedAppx 5.

The co-owner of property foreclosed by a federal tax lien failed to show that he and the government had reached a settlement to release the property from the lien. There was no evidence that the government accepted his offer in compromise.

E.F. Ressler, DC Ala., 98-1 USTC ¶50,417.

Correspondence between a mutual insurance corporation and the government did not reflect an intention that the filing of a stipulation of dismissal would be a condition precedent to the completion of settlement negotiations. Because the parties entered into a valid settlement agreement, the government's acceptance letter merely stated that a stipulation of dismissal would "reflect" the agreement which had already been reached. As such, a stipulation was not essential to the validity of the parties' settlement agreement.

Principal Mutual Life Insurance Co., FedCl, 93-2 USTC ¶50,480, 29 FedCl 157. Aff'd on another issue, CA- FC, 95-1 USTC ¶50,160, 50 F3d 1021.

The IRS was not estopped from denying that it settled tax liabilities, even though it retained money offered as a settlement, because the procedures set forth for settling disputes were not followed. Since the statutory requirements were not followed, there could be no settlement, and thus no estoppel.

W.F. Brooks, DC W.Va., 86-2 USTC ¶9548.

A taxpayer's offer of compromise that contained a waiver of limitations was rejected by the IRS, and, therefore, the IRS could not assert that it accepted the portion of the offer containing the waiver.

G. Hamm, DC Ky., 79-2 USTC ¶9731.

The Commissioner effectively accepted an offer to compromise a refund claim when he mailed the taxpayer's attorney a letter accepting the offer and informing the taxpayer that the refund settlement would be credited against the unpaid tax liability of a later tax year. The court rejected the taxpayer's argument that the IRS letter constituted a counteroffer rather than an acceptance because it materially altered the terms of the offer.

J.P. Kehoe, DC N.Y., 79-2 USTC ¶9524.

There was no acceptance of a compromise settlement, which was negotiated during the trial, where the government's acceptance was not timely and unequivocal and where the taxpayer's counsel decided not to accept the settlement offer. Therefore, the taxpayer was not bound by the settlement agreement.

B.R. Kurio, DC Tex., 71-1 USTC ¶9112.

The IRS did not abuse its discretion when it refused married taxpayers' offer in compromise even though their tax liability arose from the application of the alternative minimum tax (AMT) as a result of the exercise of an incentive stock option on stock which then fell precipitously in value. The taxpayers had the ability to meet their obligation in full (albeit with a substantial reduction in their standard of living). The fact that their tax bill was much higher than the value of what they ended up receiving was not a reason for the IRS to accept the taxpayers' offer. The IRS was precluded from accepting an offer in compromise that would undermine compliance with the tax laws. Whether or not AMT is unfair is a question for Congress, not the IRS.

R.J. Speltz, 124 TC 165, Dec. 55,961.

Disallowance of tithes as allowable expenses in determining a taxpayer's ability to pay outstanding tax liabilities for purposes of an offer in compromise was not an abuse of an IRS Appeals officer's discretion even though the taxpayer argued that tithes were required as a condition of employment. At the Appeals hearing, the taxpayers were given the opportunity to substantiate that the husband was a minister but they failed to do so and the court was not persuaded that tithing was a condition of employment.

B.M. Pixley, 123 TC 269, Dec. 55,744.

An IRS Appeals officer did not abuse her discretion in rejecting an individual's offers-in-compromise where those offers did not provide for an immediate payment equal to the available cash value of the taxpayer's life insurance policies. The court found no authority requiring the IRS to accept less than the full value on the grounds suggested by the taxpayer, that he and his wife are "in their older years."

L.D. McClanahan, 95 TCM 1625, Dec. 57,478(M), TC Memo. 2008-161.

The IRS did not abuse its discretion when it rejected multiple offers-in-compromise submitted by a married couple; therefore, a proposed levy and filing of a federal tax lien were appropriate. The offers contained a number of defects with regard to the taxpayers' reasonable collection potential, which was largely based on the amount they could realize from the equity in their home. The IRS found that their initial offer used outdated appraisals for the home and questioned the validity of a second mortgage on the property held by husband's father, which was recorded shortly before the filing of the notice of federal tax lien. The taxpayers' second offer, based on a recommendation by an IRS Appeals officer, was also insufficient. The IRS's Engineering Group had found that the market value of the taxpayers' home could be 30 percent to 40 percent higher than that stated in the second offer.

W.G. Schwartz, 95 TCM 1427, Dec. 57,424(M), TC Memo. 2008-117.

The Appeals office did not abuse its discretion when it rejected an individual's offer-in-compromise (OIC) and sustained the IRS's notice of federal tax lien. The Appeals officer properly concluded that the offer was inadequate because it failed to include the value of an interest in real property that was awarded to her as part of her divorce settlement. The taxpayer failed to provide an adequate explanation as to why the property interest was not included when it constituted a dissipated asset that should have been included in her OIC.

J.L. Ashlock, 95 TCM 1220, Dec. 57,363(M), TC Memo. 2008-58.

The IRS Appeals Office did not abuse its discretion by rejecting a married couple's offer-in-compromise where the taxpayers had underreported their income for several tax years due to claimed losses and credits from Hoyt partnership tax shelter investments. The taxpayers argued that their offer should have been accepted because of their age, health and anticipated postretirement earnings. However, the court found that the taxpayers failed to show that payment of more than they offered would render them unable to meet their basis living expenses in retirement.

R. Bergevin, 95 TCM 1031, Dec. 57,307(M) , TC Memo. 2008-6.

An IRS Appeals officer abused her discretion by including the full amount of an individual's dissipated assets in his net realizable equity (NRE) during her evaluation of his offer-in-compromise. His NRE should not have included amounts paid for: attorney's fees incurred in the representation in his tax case; attorney's fees incurred in a civil lawsuit he filed for unpaid wages; an estimated tax payment made for one of the tax years at issue; and a lump-sum payment of delinquent child support.

D.L. Samuel, 94 TCM 392, Dec. 57,141(M), TC Memo. 2007-312.

The IRS did not abuse its discretion in rejecting an individual's offer-in-compromise (OIC). The OIC was for less than one-third of his total tax liability and the individual's assets and income were valued at more than the full amount of his assessed tax liability. The individual, while lacking sufficient income to fund an installment agreement, held a one-half interest in two parcels of real estate. The value of the individual's interest in the real estate exceeded the amount of his tax liability. The individual's argument that he owed his brother, who owned the other half interest in the real estate, more than the value of his interest, was rejected because it was unsupported by evidence of such liability.

W.A. Mootz, 94 TCM 362, Dec. 57,131(M), TC Memo. 2007-303.

The IRS Appeals Office did not abuse its discretion in rejecting a married couple's offer-in-compromise where the taxpayers had underreported their income for several tax years due to claimed losses and credits from Hoyt partnership tax shelter investments. The IRS Appeals officer considered all of the evidence submitted, and reasonably applied the guidelines for evaluating an offer-in-compromise. The offer was unacceptable because, among other reasons, the taxpayers were not forthcoming in establishing their financial status, acceptance of the offer would undermine compliance with the tax laws by taxpayers in general, and the taxpayers had the financial wherewithal to pay more than the offered amount. The officer adequately considered the taxpayers' unique facts and circumstances, and the taxpayers did not show that requiring them to pay more than the offer amount would result in an economic hardship. Public policy did not demand that the taxpayers' offer be accepted because they were victims of fraud, and acceptance of the offer would not enhance voluntary compliance by other taxpayers.

M. Smith, 93 TCM 1047, Dec. 56,880(M), TC Memo. 2007-73.

Refusal to accept a married couple's offer-in-compromise was not an abuse of discretion. The taxpayers did not demonstrate either that they would suffer economic hardship from the proposed collection method or that public policy and equity reasons weighed in favor of accepting their offer. The case was not a "longstanding" case in which forgiveness of penalties and interest was appropriate, and there was no evidence that the IRS Appeals officer failed to give adequate consideration to the taxpayers' unique facts and circumstances. Public policy did not demand acceptance of the offer because the taxpayers were victims of a shelter promoter's fraud. Acceptance of the compromise would reduce the risks involved in investing in tax shelters, undermining voluntary compliance with the tax laws.

G. Hansen, 93 TCM 983, Dec. 56,861(M), TC Memo. 2007-56.

Rejection of a taxpayer's offer in compromise was not an abuse of discretion where the financial information provided by the taxpayer conflicted with the implications of the terms of the taxpayer's marital settlement and separation agreement. The information provided did not explain the inconsistencies with regard to the ownership of various assets; thus, it was not sufficient to permit a reasonable analysis of the taxpayer's offer.

J.J. Kerr, 93 TCM 932, Dec. 56,846(M), TC Memo. 2007-43.

The IRS's rejection of an offer-in-compromise from investors in a cattle-breeding tax shelter was not arbitrary, capricious or without sound basis in fact or law, and the IRS was allowed to proceed with its collection action. The IRS did not abuse its discretion in rejecting the offer despite the taxpayer's claim of special circumstances or economic hardship. The IRS was not required to address every aspect of the taxpayers' special circumstances in the notice of determination and its calculation of the taxpayers' reasonable collection potential far exceeded the taxpayers' offer. In addition, the IRS was not required to accept the taxpayer's offer based on considerations of public policy or equity. The longstanding nature of the taxpayers' case did not require acceptance of the offer-in-compromise, the IRS could rely on an example in the Internal Revenue Manual that was similar although not identical to the taxpayers' case, and the IRS did not have to consider all of the taxpayers' equitable facts, including their claim that they were victims of fraud. Finally, the taxpayers' other arguments regarding compromise of penalties and interest, the IRS's alleged failure to provide the court with sufficient information, the IRS's deadline for submission of information, the husband's pending innocent spouse claim and the IRS's alleged failure to balance the need for efficient tax collection of taxes with the concern that collection be no more intrusive than necessary were rejected.

C. Andrews Est., 93 TCM 891, Dec. 56,831(M), TC Memo. 2007-30.

The IRS's rejection of an offer-in-compromise from investors in a cattle-breeding tax shelter was not arbitrary, capricious or without sound basis in fact or law, and the IRS was allowed to proceed with its collection action. The IRS did not abuse its discretion in rejecting the offer despite the taxpayer's claim of exceptional circumstances. In addition, the IRS was not required to accept the taxpayer's offer based on considerations of public policy or equity. The longstanding nature of the taxpayers' case did not require acceptance of the offer, the IRS could rely on an example in the Internal Revenue Manual that was similar although not identical to the taxpayers' case, and the IRS did not have to consider the taxpayers' claim that they were victims of fraud. Finally, the taxpayers' other arguments regarding compromise of penalties and interest, the IRS's alleged failure to provide the court with sufficient information, the IRS's refusal to delay the Code Sec. 6330 hearing, the wife's pending innocent spouse claim, and the IRS's alleged failure to balance the need for efficient tax collection with the concern that collection be no more intrusive than necessary were rejected.

G. Freeman, 93 TCM 879, Dec. 56,829(M), TC Memo. 2007-28.

The IRS's rejection of an offer-in-compromise from investors in a cattle-breeding tax shelter was not arbitrary, capricious or without sound basis in fact or law, and the IRS was allowed to proceed with its collection action. The IRS did not abuse its discretion in rejecting the offer despite the taxpayers' claim of special circumstances or economic hardship. The IRS was not required to address every aspect of the taxpayers' special circumstances in the notice of determination and its calculation of the taxpayers' reasonable collection potential far exceeded the taxpayers' offer. In addition, the IRS was not required to accept the taxpayers' offer based on considerations of public policy or equity. The longstanding nature of the taxpayers' case did not require acceptance of the offer, the IRS could rely on an example in the Internal Revenue Manual that was similar although not identical to the taxpayers' case, and the IRS did not have to consider the taxpayers' claim that they were victims of fraud. Finally, the taxpayers' other arguments regarding compromise of penalties and interest, the IRS's alleged failure to provide the court with sufficient information, the IRS's refusal to delay the Code Sec. 6330 hearing, and the IRS's alleged failure to balance the need for efficient tax collection with the concern that collection be no more intrusive than necessary were rejected.

R. Carter, 93 TCM 861, Dec. 56,826(M), TC Memo. 2007-25.

An IRS Appeals officer did not abuse her discretion in rejecting a taxpayer's offer-in-compromise. The Appeals officer correctly concluded that acceptance of the offer-in-compromise would not promote effective tax administration. Further, she did not abuse her discretion in determining that the taxpayer's real property had a value in excess of the amount indicated by the taxpayer, which was based on an outdated appraisal, and she correctly determined that the reasonable collection potential was greater than the taxpayer's offer amount.

G.W. McDonough, 92 TCM 386, Dec. 56,665(M), TC Memo. 2006-234.

The IRS did not abuse its discretion when it rejected an elderly couple's compromise offer that amounted to less than half of their estimated tax liability. The IRS was not required to compromise the couple's tax liability in order to promote effective tax administration based on economic hardship, public policy or equity grounds because the taxpayers had sufficient assets to pay the tax owed and still meet their necessary living expenses for the foreseeable future. Further, it did not abuse its discretion in disregarding the couple's speculative future medical expenses. In addition, the IRS was not required to accept the offer based on the taxpayers' claim that they were the victims of fraud because the couple's situation was typical of many tax shelter participants who claimed deductions, obtained tax advantages and were now required to pay their tax liability. Thus, the IRS's determination to reject the offer-in-compromise was not arbitrary, capricious, or without a sound basis in fact or law, and it was not abusive or unfair to the taxpayers.

D. Clayton, 92 TCM 222, Dec. 56,612(M), TC Memo. 2006-188.

IRS representatives did not accept or intend to accept the offer of a husband and wife to settle their tax deficiency case. The IRS appeals officer to whom the offer letter was sent did not make a written or oral response, and did not accept the offer. The IRS's counsel in the case did not accept the offer, where the offer was not made to him, he was unaware of its specifics, and the appeals officer conducted the negotiations. Although it was disputed whether the IRS's counsel had told taxpayers' counsel that a settlement had been reached, IRS counsel's statement was, at best, his understanding of the intent or actions of the appeals officer or her office.

R.R. Smith, 92 TCM 219, Dec. 56,611(M), TC Memo. 2006-187.

The IRS's refusal of an individual's offer to compromise her alternative minimum tax (AMT) liability, which arose from the exercise of incentive stock options (ISO), was not an abuse of discretion. The fact that the taxpayer's AMT liability was much higher than the value of income she actually received, was not a reason for the IRS to accept her offer. Any inequity in the application of the AMT in situations such as the taxpayer's is a question for Congress to resolve and not the IRS.

C. Wai, 92 TCM 181, Dec. 56,602(M), TC Memo. 2006-179.

An IRS Appeals officer did not abuse her discretion in rejecting an taxpayer's offer-in-compromise. The Appeals officer's rejection of the offer-in-compromise was justified because the disclosure that the taxpayer had incurred additional tax liability without making payment suggested that the taxpayer preferred consumption over meeting his legal obligations. The Appeals officer had also agreed to allow a collection alternative if the taxpayer met certain conditions, but the taxpayer did not agree to those conditions. Finally, collection of the full tax liability would not have caused the taxpayer and his family financial hardship. Delaying his retirement plans was not considered a hardship.

J.G. Dostal, 90 TCM 496, Dec. 56,194(M), TC Memo. 2005-264.

An IRS Appeals officer's determination to proceed with collection of an individual's unpaid tax liability was not an abuse of discretion. Although the taxpayer's allegation of economic hardship was worthy of review, the taxpayer's substantial equity in his home, against which he could borrow, weighed against a finding of economic hardship. Accordingly, the IRS did not abuse its discretion by rejecting the taxpayer's offer to compromise.

K. Hawkins,, 89 TCM 1075, Dec. 55,999(M), TC Memo. 2005-88.

A settlement agreement between an individual and the IRS did not allow the taxpayer to claim business losses related to his wife's furniture business in a specific tax year. The IRS disallowed the losses, categorizing the expenses as start-up costs required to be capitalized. The IRS and the taxpayer reached a settlement for that year that included, in part, the disallowance of the business loss. The taxpayer argued, however, that the prior to signing the settlement an agreement was reached to allow the loss in the following year. Although the IRS agreed that the loss might be allowed in a subsequent year, there was no assent to allow the loss in any specific tax year. Moreover, the settlement did not contain any express agreement as to the business losses. Therefore, there was no binding agreement as to the losses.

K.J. Barela, 88 TCM 65, Dec. 55,707(M), TC Memo. 2004-175.

An IRS Appeals officer abused his discretion in denying a couple's offer in compromise on the grounds that the taxpayers had inadequate income to meet their living expenses and pay the proposed monthly payments. The officer appeared to rely exclusively on the IRS's prescribed schedule of national and local average living expenses to determine that the taxpayers' basic living expenses exceeded their monthly income. However, all of the facts and circumstances, including the schedule of actual expenses submitted by the taxpayers, should have been considered in determining whether the taxpayers could pay both their expenses and the installment payments (Code Sec. 7122(c)(2)). The filing of the federal tax liens to secure the IRS's interest in the unpaid tax liability was not an abuse of discretion.

M. Fowler, 88 TCM 17, Dec. 55,689(M), TC Memo. 2004-163.

Married taxpayers' challenge to an adverse Collection Due Process determination was rejected because they failed to establish an abuse of discretion on the part of the IRS. The officer's determination that the taxpayers had some ability to pay was supported by their proposed offer in compromise. In light of the unresolved question regarding the taxpayers' ownership of real property, the rejection of their proposed offer in compromise was sustained.

D.G. Willis, 86 TCM 506, Dec. 55,334(M), TC Memo. 2003-302.

A married couple's offer to settle their tax liability for the amount of their deficiency, but excluding penalties and interest, did not constitute a binding compromise agreement. The taxpayers had received an oral confirmation from the IRS auditor that their offer had been accepted; however, the auditor believed their offer was a request for additional time to pay. In fact, the taxpayers had not submitted the offer on the appropriate form and had not received a written confirmation that the offer was accepted. Further, there was no mutual assent to the offer since the auditor misunderstood the nature of their request.

J. Ringgold, 86 TCM 28, Dec. 55,218(M), TC Memo. 2003-199.

The IRS's action in cashing a check submitted by an exempt association with a letter that purported to be an offer in compromise did not amount to an acceptance of the entity's offer and did not bar the IRS from asserting that its income activity gave rise to unrelated business taxable income. Rather, the letter merely constituted a settlement offer to resolve the dispute resulting from the IRS audit of the taxpayer for three of the tax years in issue. Moreover, no compromise was effected because the letter failed to meet the specific requirements of Code Sec. 7122.

Education Athletic Assoc., Inc., 77 TCM 1525, Dec. 53,284(M), TC Memo. 1999-75.

Married taxpayers who were assessed deficiencies did not have a binding settlement agreement with the IRS regarding the years at issue. Although the taxpayers submitted several Forms 656, Offer in Compromise in Any Civil or Criminal Case, and District Director's Recommendation, the IRS never accepted any of their settlement offers. An IRS employee's signing of the forms to indicate that the IRS accepted the taxpayers' waiver of the limitations period did not constitute an acceptance of their offers. Further, the IRS employee and the taxpayers' accountant testified that the IRS employee never orally agreed to accept the taxpayers' proposals. Since the husband had a history of dishonest, criminal behavior, his testimony with respect to the alleged oral agreement lacked credibility. Thus, the taxpayers failed to establish that a binding agreement existed.

D.L. Streck, 74 TCM 545, Dec. 52,240(M), TC Memo. 1997-407. Aff'd, CA-6 (unpublished opinion), 99-2 USTC ¶50,650.

The IRS and an investor did not enter into a binding settlement agreement on deficiencies related to a tax shelter because the parties did not mutually assent to a settlement. The taxpayer failed to indicate his belief that a settlement agreement had been entered into until six months after he received written indications that the IRS did not believe that a settlement agreement existed.

T.W. Heil, 68 TCM 513, Dec. 50,071(M), TC Memo. 1994-417.

The government was not bound by an alleged proposed settlement between a former attorney and his wife and the IRS. A proposed decision document did not conform to the formalities required to execute a binding settlement. Even if the document constituted a formal settlement offer, there was no evidence that the taxpayers executed the agreement. Moreover, the IRS never executed the agreement, and no such document was filed with the Tax Court.

B.J. O'Sullivan, 68 TCM 407, Dec. 50,046(M), TC Memo. 1994-395. Aff'd, CA-9 (unpublished opinion), 96-2 USTC ¶50,496.

A notice of deficiency was not invalidated on account of a prior assessment where it was sent to a taxpayer who, along with her husband (who was also her business partner), had signed a Form 870-L(AD) settlement offer that was not signed by the IRS until after the husband filed for bankruptcy. The settlement agreement was void as to both spouses because acceptance of the offer was precluded by the automatic stay provision of the Bankruptcy Code.

N.J. Gillian, 66 TCM 398, Dec. 49,218(M), TC Memo. 1993-366.

In a case involving a delinquent taxpayer who entered into a compromise agreement with the IRS to discharge the federal tax lien on her home in order to facilitate its sale, and who subsequently sought to compromise her tax liability after a collateral agreement was signed, Chief Counsel determined that the Service could accept the offer. The taxpayer submitted a separate offer in compromise conditioned on the Service's release of the mortgage on her home. However, acceptance of such an offer did not require the IRS to release the mortgage. A collateral agreement in which the taxpayer grants additional security to the IRS creates an independent cause of action and, thus, the original unpaid taxes giving rise to the statutory liens remain as separate liabilities. Absent language to the contrary in the compromise agreement, the mortgage remains unaffected.

IRS Letter Ruling 200133028, July 17, 2001.

Chief Counsel determined that a Compliance Area Director is entitled to compromise a case notwithstanding an opinion by Associate Area Counsel that opposed acceptance of a taxpayer's offer based upon a purported economic hardship that would ensue from collection in full. Although Code Sec. 7122(b) requires the opinion of the Associate Area Counsel whenever an offer in compromise is made, the opinion need not favor acceptance of the compromise in order for the IRS to accept the offer. The ultimate determination of whether an offer is accepted lies with the Area Director or other delegated official. However, an offer may not be accepted unless one of the bases for compromise recognized by Reg. 301.7122-1T has been established.

CCA Letter Ruling 200128054, May 29, 2001.

The IRS could exercise its discretion to accept an offer in compromise in spite of the fact that processability rules pertaining to deposit, payment and filing of employment taxes changed prior to acceptance of the offer. Chief Counsel determined that the in-business corporation could not compel the IRS to apply the former rule that it demonstrated compliance by showing that it had been current in the preceding two quarters, rather than demonstrating compliance by having timely filed and timely deposited the previous two quarters' taxes. Nothing in the Internal Revenue Code or regulations prevented the Service from exercising its discretion to process an offer based on criteria that existed when the offer was first submitted.

CCA Letter Ruling 200137001, April 12, 2001.