Friday, January 7, 2011

MEMORANDUM FOR THE NATIONAL TAXPAYER ADVOCATE – Nina Olson OFFER IN COMPROMISE ISSUE – BUSINESS ACCOUNTS RECEIVABLES One of the distortions in the Internal Revenue Manual is that accounts receivables are treated as an asset but not the business payables. Obviously, income from the receivables are necessary for the business payables. Hence, the receivables are an asset in the OIC but it is not offset by the necessary payables. This distortion of a business “collection potential” (the OIC standard in Policy StatementP-5-100) goes against all accounting and valuation principles. And it is contrary to the Policy Statement P-5-100 which has been followed by courts. This obvious distortion needs to be corrected. If the IRS refuses to make this change, I urge you to report this distortion of section 7122 to Congress because it is clearly contrary to the intent of Congress as reflected in the legislative history to section 7122. 888-712-7690

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