Opinion ID: 538936
Heading Depth: 2
Heading Rank: 3

Heading: the purported settlement of klein's tax liabilities

Text: 18 The Tax Court correctly held that a binding settlement was not present despite the appellant's belief that he accepted an unconditional offer from the I.R.S. to settle the disputed tax liabilities. The settlement of disputed tax liabilities is governed by 26 U.S.C. Secs. 7121 and 7122; these sections authorize the Secretary of the Treasury or an authorized delegate to settle any tax disputes and compromise any civil or criminal case arising under the internal revenue laws. See Brooks v. U.S., 833 F.2d 1136, 1145 (4th Cir.1987). The requirements set forth in these statutes and the accompanying regulations are exclusive and strictly construed. Id. at 1145, 1146 (citing Botany Worsted Mills v. U.S., 278 U.S. 282, 288-89, 49 S.Ct. 129, 131-32, 73 L.Ed. 379 (1929)); Bowling v. U.S., 510 F.2d 112, 113 (5th Cir.1975). 19 The appellant asserts that the I.R.S. made an offer to settle his tax liabilities and that he later accepted the offer in writing. In support, he submitted two letters to the Tax Court purporting to constitute a valid written contract binding the I.R.S. We find that these letters do not form a valid binding agreement under the tax code. We note that even if we were to apply state contract law to this case, no binding contract was formed. At most, the letter dated March 7, 1986 from the District Counsel was a conditional offer of settlement which would become binding upon the execution of another document, a closing agreement. This letter specifically mentioned other conditions which must be met before a settlement could be reached; namely, the taxpayer must substantiate his investment, provide copies of all returns reflecting any interest in the tax shelters, and execute a closing agreement. The second letter dated March 12, 1986 also does not meet any of the requirements set forth in the statutes governing settlement of tax disputes. 20 Even if the two letters were held to be an apparent settlement, the I.R.S. would not be bound because the letters were not signed by both parties and the agent signing the March 7, 1986 letter was without authority to formally settle the appellant's tax liabilities. See, e.g., Botany Worsted Mills v. U.S., 278 U.S. 282, 49 S.Ct. 129, 73 L.Ed. 379 (1928) (attempted informal settlement by subordinate officials with no authorization to compromise under Sec. 7121 was not binding on the U.S.); Reimer v. U.S., 441 F.2d 1129, 1130 (5th Cir.1971) (per curiam) (U.S. not bound by apparent settlement where agent was without authority to compromise taxpayer's tax liability). Here, the I.R.S. and the appellant were clearly only in the initial stages of discussing possible settlement of the tax liabilities and no binding enforceable settlement was reached. 21