Section 7122 – Offer in Compromise Acceptance – Form 656

Edward A. Brinskele, Plaintiff v. The United States, Defendant.

U.S. Court of Federal Claims; 02-911T, July 3, 2008.

Related decision at 2006-2 USTC ¶50,555.

[ Code Sec. 7122]

Settlement agreement: Acceptance letter: Counteroffer: Valid and binding agreement. --
The government's letter to an individual did not constitute an acceptance of his settlement offer and did not create a valid and binding settlement of the parties' dispute. The letter did not mirror the terms of the individual's offer because it made no reference to the interest that would accrue if he failed to pay the settlement amount within 120 days of the government's acceptance. Instead, it provided that the offer would be accepted on condition that payment is made within 120 days; therefore, the letter altered the terms of the offer and was construed as a counteroffer by the government.




ORDER DENYING GOVERNMENT'S MOTION TO DISMISS


FIRESTONE Judge: Pending before the court is a motion by the defendant, the United States ("defendant" or "government"), to dismiss the above-captioned case pursuant to Rule 12(b)(6) of the Rules of the United States Court of Federal Claims ("RCFC"). The government contends that the parties entered into a final and binding settlement agreement in January of 2008, when the government alleges that it accepted the settlement offer made by the plaintiff, Edward A. Brinskele ("plaintiff" or "Brinskele"). For the reasons set forth below, the government's motion is DENIED.


BACKGROUND FACTS


The parties in the instant case have been engaged in settlement discussions since January 2007. In accordance with the practice of this court, the parties' negotiations were facilitated by Judge Christine O.C. Miller, serving as an Alternative Dispute Resolution ("ADR") judge ("ADR judge"). As a result of a settlement conference held on March 1, 2007, the plaintiff prepared a formal settlement offer, which was submitted to the government on June 29, 2007. In his offer, the plaintiff provided that he was willing to settle the case under the following conditions:
(1) The plaintiff would pay $500,000 to the government in full satisfaction of all issues raised in the case;

(2) The plaintiff would make payment within 120 days after approval of the settlement offer by the government;

(3) No interest would be paid by the plaintiff, except that interest would be payable at the statutory rate for tax liabilities if the plaintiff did not make payment within 120 days, with interest beginning on the 121st day; and

(4) If the plaintiff was able to sell property prior to approval of the settlement, the Department of Justice would recommend to the Internal Revenue Service that the federal tax liens be discharged from the property in order to facilitate the sale.

Def.'s Ex. 1. In his offer, the plaintiff also provided as follows: "Each of the parties intends to and does hereby extinguish the obligations heretofore existing between them and arising from the dispute. This agreement is not, and shall not be treated as, an admission of liability or misconduct by either party for any purpose." Id.

On September 10, 2007, the government sent the plaintiff notice that it had received the plaintiff's offer letter and that it interpreted the plaintiff's offer as follows:
The offer calls for plaintiff, Edward R. Brinskele, to pay the sum of $500,000.00 within 120 days after plaintiff is advised by the Department of Justice that his settlement has been accepted. If payment is made after the 120-day period, interest will be payable at the underpayment rate beginning on the first day after the expiration of the 120-day period. The $500,000.00, and any interest that might accrue thereon, will herinafter be referred to as the "Settlement Amount." The Department of Justice, in a letter to Steve Bugos of the Internal Revenue Service, copy attached, has advised the IRS that it can release any liens to allow plaintiff to sell any of his real property provided proper escrow arrangements are made to ensure that the proceeds of any such sale will be held for the benefit of the Government. Once the settlement has been approved by the Department of Justice, the funds held in escrow will be used to satisfy the terms of the settlement... . Each party is to bear its own costs, including any attorneys' fees or expenses related to the above-captioned case.

Def.'s Ex. 2. In the letter, the government requested that the plaintiff advise the government in writing whether the letter comported with the plaintiff's understanding of the terms of the offer by signing and returning a copy of the letter. Id. It is not disputed that the plaintiff did not respond to the government's request. The parties filed joint status reports on September 20, 2007 and December 20, 2007, in which they indicated that the plaintiff's offer was being reviewed by the Department of Justice.

On January 29, 2008, the government sent the plaintiff what it alleges was notice of acceptance of the plaintiff's settlement offer, in which it stated:
This refers to your letter of June 29, 2007, transmitting an offer submitted by Edward Brinskele to compromise the above-entitled case and the Government's counterclaim against Mr. Brinskele for a Section 6672 penalty with respect to Marin Telecommunications Corporation for 1992 through the first three quarters of 1994, on the basis of a payment of $500,000.00.

This is to advise you that the offer has been accepted on behalf of the Attorney General on condition that payment be made within 120 days of this date and, with the understanding that this settlement does not constitute a compromise of any income tax liability of Edward R. Brinskele. The Chief Counsel of the Internal Revenue Service has been notified of this action.

Please deposit with this office within 120 days of this date a cashier's or certified check in the amount of $500,000.00, made payable to the "United States Treasury."

Def.'s Ex. 3 (emphasis added). The letter made no reference to the possible accrual of interest in the event of a late payment. Attached to the government's alleged notice of acceptance was a proposed Stipulation for Dismissal, which stated, "It is hereby stipulated and agreed that the complaint in the above-captioned case be dismissed with prejudice, the parties to bear their respective costs, including possible attorneys' fees or other expenses of litigation." Def.'s Ex. 4.

Sometime in late February 2008, the plaintiff requested another conference with the ADR judge to discuss the settlement. The ADR judge requested that the parties submit supplemental memoranda regarding the settlement; the government submitted its memorandum on March 6, 2008, and the plaintiff submitted his memorandum on March 12, 2008. 1 On March 12, 2008, the ADR judge issued an order returning the case to this court "for implementation of the settlement agreement." During a March 21, 2008 status conference, the plaintiff indicated his belief that the parties had not reached a settlement agreement because he understood the phrase "on condition that payment be made within 120 days of this date," contained in the government's acceptance letter, to mean that if payment were not made within 120 days the settlement would be null and void, and therefore did not believe that the acceptance letter mirrored the terms of his offer. The plaintiff also indicated that he believed that the reference to attorneys' fees in the proposed Stipulation of Dismissal constituted a material change to his offer, as his offer did not mention attorneys' fees. On April 2, 2008, the government filed the instant motion in an effort to enforce the settlement agreement between the parties. The plaintiff filed his response on June 2, 2008, and the government filed its reply on June 16, 2008.


DISCUSSION


In its motion, the government contends that the parties entered into a final and binding settlement agreement on January 29, 2008, when the government sent a letter to the plaintiff in which it accepted the plaintiff's offer. The government asserts that its acceptance did not vary in any material way from the plaintiff's offer, and accordingly, a binding settlement agreement was reached. See, e.g., Busing v. United States [ 99-1 USTC ¶50,246], 42 Fed.Cl. 679, 686-87, 690 (1999) (finding that two letters between parties could constitute an offer and an acceptance because there was "no substantive difference in the terms contained in the two letters"); Principal Mut. Life Ins. Co. v. United States [ 93-2 USTC ¶50,480], 29 Fed.Cl. 157, 161 (1993) ("[A] purported acceptance must mirror the terms of the offer to result in the formation of a contract... . If the purported acceptance attempts to restate the terms of the offer, such restatement must be accurate in every material respect." (quoting A.L. CORBIN, CORBIN ON CONTRACTS §86 (1963) (emphasis added))), aff'd [ 95-1 USTC ¶50,160] 50 F.3d 1021 (Fed. Cir. 1995). The government contends that the plaintiff offered to settle the case by paying the government $500,000.00 within 120 days of the acceptance of his offer in consideration of the government dismissing its counterclaim against the plaintiff, and that the government accepted the plaintiff's offer by agreeing to these terms.

The government asserts that its acceptance mirrored the plaintiff's offer and argues that the phrase "on condition that payment be made within 120 days of this date" simply provides that if the plaintiff complies with his obligation to pay within 120 days, he will not owe interest, and if he breaches that obligation, he will owe interest until payment is made. The government maintains that this phrase does not modify the plaintiff's offer in any material way. The government further contends that the reference to attorneys' fees in the proposed Stipulation of Dismissal does not constitute a material change to the plaintiff's offer, because the plaintiff's offer did not mention attorneys' fees, but did provide that the settlement would extinguish all "obligations heretofore existing between [the parties] and arising from the dispute." Def.'s Ex. 1. The government contends that any potential claim for the recovery of attorneys' fees by the plaintiff would constitute an obligation that, under the plaintiff's offer, would be extinguished by the settlement. Accordingly, the government contends that neither its acceptance letter nor its proposed Stipulation of Dismissal materially changed the plaintiff's offer in any way.

The plaintiff contends that the government's January 29, 2008 letter was not an acceptance of his offer, but was instead a rejection of the plaintiff's offer and a counteroffer because it added a new and material condition that was not part of the plaintiff's original offer. The plaintiff argues that his offer provided that, if payment was not made within 120 days, interest would begin to accrue, and he would owe $500,000 plus the total interest that had accrued by the actual date of payment. He asserts that the phrase in the government's acceptance letter, "on condition that payment be made within 120 days of this date," means that the proposed settlement would be null and void if the plaintiff did not pay within 120 days, which is a condition that was not included in the plaintiff's offer. The plaintiff also asserts that the mention of attorneys' fees in the government's proposed Stipulation of Dismissal, attached to its January 2008 letter, is a material change to the plaintiff's offer, as his offer made no mention of attorneys' fees. 2

The court agrees with the plaintiff that the government's January 2008 letter did not constitute an acceptance of the plaintiff's offer because the letter did not mirror the terms of the plaintiff's offer. While the notice sent by the government to the plaintiff in September 2007 indicated that interest would accrue if the plaintiff did not pay the settlement amount within 120 days of the government's acceptance, the formal acceptance letter sent by the government in January 2008 made no reference to the accrual of interest. Instead, the government's letter stated, "This is to advise you that the offer has been accepted on behalf of the Attorney General on condition that payment be made within 120 days of this date and, with the understanding that this settlement does not constitute a compromise of any income tax liability of Edward R. Brinskele." Def.'s Ex. 3 (emphasis added). This court has held that an acceptance letter must mirror the terms of an offer in order to give rise to a binding settlement agreement. See Principal Mutual [ 93-2 USTC ¶50,480], 29 Fed.Cl. at 161. Because the alleged acceptance letter provided that the plaintiff would pay the government $500,000.00 to settle the case, and provided that payment would be made within 120 days, but did not provide that interest would begin accruing on the 121st day if payment was not made before that, the letter altered the terms of the plaintiff's offer in a material respect. Accordingly, the January 2008 letter must be construed as a counteroffer by the government, and the parties have not entered into a binding settlement agreement.


CONCLUSION


For all of the foregoing reasons, the government's motion to dismiss is DENIED. The government shall file a status report by Monday, July 14, 2008 proposing a discovery schedule and a trial date. The plaintiff shall respond to the government's proposed schedule by Friday, August 1, 2008.

IT IS SO ORDERED.

1 On March 4, 2008, the plaintiff's counsel filed a motion to withdraw as counsel, which was granted on March 13, 2008. Accordingly, the plaintiff is now proceeding pro se.

2 The plaintiff further contends that he was induced into making a settlement offer by the government because the government withheld an assessor's report from the plaintiff and made false statements to the plaintiff with regard to the basis for the assessment against the plaintiff. The plaintiff relies upon an assessment report dated June 23, 1998, which the plaintiff argues demonstrates that the government's assessor did not know the exact amount of tax for which the plaintiff should be held responsible. The government argues that the plaintiff's assertions are incorrect and are not supported by the discovery completed by the parties before the plaintiff filed a motion for summary judgment in 2005. Because the court has determined that the parties have not reached a settlement, the court need not consider the plaintiff's additional arguments regarding the assessment report at this time.

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.


Part 5. Collecting Process
Chapter 8. Offer in Compromise
Section 8. Acceptance Processing
________________________________________
5.8.8 Acceptance Processing
• 5.8.8.1 Overview
• 5.8.8.2 Amending Form 656
• 5.8.8.3 Closing a Case as an Acceptance
• 5.8.8.4 Acceptance Processing for Specific Types of Offers
• 5.8.8.5 Legal Opinion of Counsel
• 5.8.8.6 Public Inspection File
• 5.8.8.7 Accepted Offer File Processing
5.8.8.1 (09-01-2005)
Overview
1. The determination to accept an offer in compromise is based on sound decisions relating to an analysis of the individual taxpayers facts and circumstances and financial situation. Documentation supporting this decision and proper approval levels are required to complete the acceptance. This section describes the process for accepting an offer in compromise.
5.8.8.2 (09-01-2005)
Amending Form 656
1. When an offer is being recommended for acceptance, the tax periods owing and/or payment terms may need to be adjusted. This will require the taxpayer to submit an amended Form 656 to reflect the new terms.
A. Mark it "amended" in red on the top margin of page one.
B. Input "A" (amended) on screen one of the AOIC record to reflect receipt of an amended offer, but do notchange the "offer pending date" .
C. Add any new tax periods not included on the original Form 656 to the MFT screen. The date the IRS official signed the amended offer should be added to the MFT screen as the waiver date for the new periods only.
D. Delete any tax periods found on the MFT screen that are no longer owing and/or are not included on the amended offer.
E. Add the new terms for payment, if any, to the terms screen.
5.8.8.3 (09-01-2005)
Closing a Case as an Acceptance
1. Prior to preparing an acceptance report, IDRS command code " AMDIS" should be checked to ensure that no additional assessments are pending. If an open audit is found contact should be made to resolve the issue per instructions in IRM 5.8.4.12.1, Cases Pending in Examination. Tax must not be compromised unless it is assessed and legally due, therefore IDRS should also be checked to ensure that all tax included on the accepted offer has been properly assessed and is still due and owing.
2. Before closing a case as an acceptance, document the case history on AOIC regarding the decision. Include any special instructions for the Monitoring Offer in Compromise (MOIC) unit regarding application of funds or requesting a lien re-filing if one will be required during the terms of any deferred payment offer. See IRM 5.12, Federal Tax Liens, for more information about when a re-file may be required.
3. Order a MFTRA-X as close to the acceptance date as possible without delaying acceptance. Sanitize the MFTRA-X to "black out" or redact all tax information that is not to be disclosed to the public as follows:
Note:
The AOIC download process may be used to generate and print a sanitized report, which may be used instead of the MFTRA-X.
A. Name and SSN of a co-obligor spouse if the spouse is not a party to the compromise.
B. Number of exemptions.
C. Filing status.
D. Adjusted gross income.
E. Taxable income.
F. Principal Industry Activity Code.
G. Transaction Codes with neither debit or credit money amounts. The entire line including the date should be redacted.
H. Transactions Codes and explanations dealing with fraud, negligence, or criminal investigations, but not the date and amount of the transaction.
I. Power of Attorney/Tax Information Authorization (POA/TIA) on file.
4. Prepare an Acceptance Report. The Offer in Compromise Recommendation Report referenced in IRM Exhibit 5.8.4–3, Offer in Compromise Recommendation Report, may be used for this purpose. The report should contain at a minimum:
A. The taxpayers personal information such as age, health, dependents, education and occupation.
B. The cause of the delinquency and state of current compliance.
C. The amount of reasonable collection potential (RCP) and an explanation of how the RCP was calculated.
Note:
The Asset/Equity Table (AET) and Income/Expense Table (IET) shown in IRM Exhibits 5.8.4–1 and 5.8.4–2, respectively will generally fulfill this requirement.
D. Whether or not special circumstances exist and how they affected the amount agreed upon.
E. Negotiations resulting in the acceptable offer amount.
F. A conclusion that summarizes the basis for acceptance.
5. In the rare situation where relevant facts of a confidential nature exist that should not be included in the recommendation report, complete a supplemental memorandum for the record and include it in the case file. Do not include information already discussed in the offer recommendation report.
6. Update the AOIC record as follows:
A. Main Screen — Update to reflect the correct basis for compromise and if appropriate to indicate the existence of special circumstances. Update the disposition code to "1" (proposed acceptance).
B. MFT Screen — Input the assessment date for each module. Press "I" to update interest to the current date using the INTST command.
Note:
If any modules have restricted penalty or interest, use IDRS command code COMPAD and/or COMPAF to determine the accrued amounts. Include the accrued amounts in the total liability listed on the MFT screen. The manually accrued amounts must also be added to the paper transcript.
Note:
If any modules are Non-Master File and not on IDRS, secure an Automated Non-Master File (ANMF) transcript and update it as necessary using IDRS command code COMPAD and/or COMPAF.

C. K-Data Request Screen — Do a re-request for an IDRS download on all applicable TINS to update the AOIC screens with the accruals to the current date. Once the screens are updated generate and print the Public Offer report to use in lieu of a MFTRA-X.
Note:
A MFTRA-X may be requested through IDRS instead of taking this step.

D. Terms screen — Update the terms to those reflected on the offer that is being accepted ensuring that any collateral agreement(s) are referenced as necessary.
7. Generate and print the Form 7249, Offer Acceptance Report, for the required signatures. The accepting official is the official that has delegated responsibility for accepting based on the type and dollar amount of the case. Delegation Order Number No. 5-1 (formerly Delegation Order 11, Rev. 29) provides the level of authority for approving all Offer in Compromise dispositions.
8. Generate and print the appropriate acceptance letter for the signature of the delegated official. Attach copies of the accepted Form 656 and any applicable collateral agreement(s).
9. Generate and print the Power of Attorney (POA) letter if there is an authorized representative.
10. Assemble the file using Document 9600 B, Tab Dividers for Offer-in-Compromise Case Files Document.
Note:
The use of labeled dividers is required.
11. Submit the file for approval, routing to Counsel ( See IRM 5.8.8.5), and signing of the letter(s).
12. Upon approval and signature, date and mail the acceptance letter(s). Ensure that signed and dated copies are retained in the offer file.
13. Make a copy of the Form 7249, Offer Acceptance Report, and mail it together with the sanitized transcripts to the appropriate office for placing in the public offer file.
14. Close the case on AOIC and process. See IRM 5.8.8.7.
5.8.8.4 (09-01-2005)
Acceptance Processing for Specific Types of Offers
1. When two or more related offers are being recommended for acceptance, but acceptance is based on one financial analysis, one acceptance narrative may be used. Multiple files should be created containing the separate items that pertain to each offer. It is not necessary to duplicate the information that pertains to both files. The files should be clearly marked indicating that there are related offers, for example 1 of 2 and 2 of 2.
2. When the accepted offer includes Trust Fund Recovery Penalty (TFRP) assessments, a careful review must be made to ensure all TFRP assessments are included. Generally TFRP assessments made before August, 2000, will lump together all unpaid corporate tax quarters and be assessed under the tax period of the latest quarterly period owed by the corporation. Beginning in August, 2000, TFRP assessments are made for each quarterly period that was owed by the corporation. The Form 656 and the Form 7249, Offer Acceptance Report, must match and must reflect each individually assessed TFRP tax period.
3. Offers from Federal employees require a determination of whether public policy implications exist based on the sensitivity of the employee's position or area of responsibility. The result of this consideration should be documented in the case file. Offer acceptances for employees of the Internal Revenue Service additionally require the approval of the Territory Manager or SB/SE Compliance Operations Manager.
Note:
Offers from Federal civil service retirees are to be considered under normal procedures.
5.8.8.5 (09-01-2005)
Legal Opinion of Counsel
1. Counsel is required to review offers when the total liability for all related offers on the same taxpayer is $50,000 or more. The purpose of counsel's review is to determine whether the offer legally meets the standards of Doubt as to Liability (DATL), Doubt as to Collectibility (DATC) or the promotion of Effective Tax Administration (ETA). Counsel reviews the offer to ensure it meets the legal requirements for compromise and conforms to the Services' policy and procedures.
2. Counsel’s signature on the Form 7249, Offer Acceptance Report, constitutes the legal opinion required by IRC 7122(b). By signing the form, Counsel is certifying that all of the legal requirements for compromise have been met. If Counsel does not sign the form, the case cannot be compromised unless any legal issues are resolved.
3. Counsel’s signature does not necessarily indicate concurrence with the acceptance decision, but only that there are no legal barriers to compromise. In some cases Counsel may determine that the compromise is legally permissible, but may raise concerns of a policy or other issues of a non-legal nature. In such cases, the Form 7249, Offer Acceptance Report, will be signed and any other issues will be communicated by separate memorandum.
4. It is not required that Counsel concur in the acceptance decision in order for a compromise to go forward. However, the accepting official will review and consider any opinion from Counsel prior to making the acceptance final. Where major policy concerns have been raised, it is appropriate to document the case history indicating that the accepting official fully considered the issues before accepting the offer.
5.8.8.6 (09-01-2005)
Public Inspection File
1. Public inspection of certain information regarding all offers in compromise accepted under Internal Revenue Code (IRC) Section 7122 and is authorized by IRC Section 6103(k)(1).
2. A separate file of accepted Offer in Compromise records will be maintained for this purpose and made available to the public for a period of one year. The public inspection file will be maintained in a location designated by the Area office. The Area office may destroy the Public Inspection file after the year has expired.
3. For each accepted offer the file will only contain the following items:
• A copy of the Form 7249, Offer Acceptance Report
• The sanitized MFTRA-X or ANMF transcript.
4. The office that has accepted the offer will be responsible for providing all required documents as soon as possible after acceptance, for inclusion in the public inspection file.
5.8.8.7 (09-01-2005)
Accepted Offer File Processing
1. Once an offer has been closed on AOIC it should be held in-house until the following Monday. On Monday or as soon as practical thereafter, the offer should be released on AOIC and the entire file mailed to the proper Monitoring Offer in Compromise (MOIC) unit. Care must be used to ensure that the offer is mailed to the same unit it is released to on AOIC. If two related offers are accepted and one has a Business Operating Division (BOD) code of Small Business (SB) and the other is coded Wage & Investment (WI), change the BOD code on the WI offer on AOIC to match the BOD code of the SB offer before releasing it to the MOIC unit and ship both to the designated SB site.
2. If the case is chosen for Embedded Quality (EQ) review, copies of the following documents should be made and placed in the file in lieu of the originals before the offer is forwarded for review. The following original documents should be sent to the MOIC unit in a file folder clearly indicating that the remaining information was mailed to EQ.
A. Original and amended Form 656, Offer in Compromise
B. Form 7249, Offer Acceptance Report
C. Copy of the Acceptance letter(s)
D. Any collateral agreements
Note:
Before forwarding the case to the MOIC unit take the following steps:
• Verify that the original and any amended Form(s) 656 are in the case file
• Check to be sure that the Form(s) 656, Form 7249, IDRS, and AOIC all reflect the same tax liability period(s).
• Validate the waiver dates on the Form(s) 656, IDRS, and AOIC are correct and consistent.
3. Accepted offer files should be mailed with a Form 3210. Shipping offices must ensure that a receipted copy of the Form 3210 is received. If a receipted copy of the Form 3210 is not received within 30 calendar days of mailing, contact should be made with the receiving office and tracing actions taken. Appropriate actions must be taken to recover or replace missing files



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.

The government's letter to an individual did not constitute an acceptance of his settlement offer. The letter did not mirror the terms of the offer because it made no reference to the interest that would accrue if the individual failed to pay the settlement amount within 120 days of acceptance. Instead, it provided that the offer would be accepted on condition that payment is made within 120 days; therefore, the letter altered the terms of the offer and was construed as a counteroffer.

E.A. Brinskele, FedCl, 2008-2 USTC ¶50,493.