Opinion ID: 202515
Heading Depth: 2
Heading Rank: 3

Heading: Rejection of the Offer-in-Compromise

Text: 21 Finally, we turn to the IRS's rejection of Murphy's $10,000 offer-in-compromise. We review the Tax Court's decision de novo. See Fargo v. Comm'r, 447 F.3d 706, 709 (9th Cir.2006). But our review of the underlying IRS decision is deferential. We will only disturb the rejection of Murphy's offer-in-compromise if it represents a clear abuse of discretion in the sense of clear taxpayer abuse and unfairness by the IRS. Olsen, 414 F.3d at 150 (internal citation omitted). 22 The IRS may compromise a taxpayer's liability where it has a [d]oubt as to collectability of the debt. 26 C.F.R. § 301.7122-1(b)(2). A doubt as to collectability exists in any case where the taxpayer's assets and income are less than the full amount of the liability. Id. 23 Once a doubt as to collectability is established, the decision to accept or reject an offer to compromise . . . is left to the discretion of the [IRS]. Id. § 301.7122(c)(1). In exercising this discretion, the IRS must consider all the facts and circumstances of the taxpayer's case, including whether they warrant acceptance of an amount that might not otherwise be acceptable under the IRS's policies and procedures. Id. There is no dispute that Murphy established a doubt as to collectability and therefore was eligible to compromise his debt. The only question is whether the IRS abused its discretion in declining to accept Murphy's proposed compromise. 24 The IRS may reject an offer-in-compromise because the taxpayer's ability to pay exceeds the compromise proposal. See Fargo, 447 F.3d at 709-10. Under IRS procedures, the agency will not accept a compromise that is less than the reasonable collection value of the case, absent a showing of special circumstances. See Rev. Proc.2003-71(2). The IRS considers the reasonable collection value of a case to be the funds available after the taxpayer meets basic living expenses. Id. Murphy argues that the IRS's determination that the reasonable collection value of his case exceeded $10,000 was unreasonable. 25 Based on information provided by Murphy, the appeals officer calculated that, after expenses, Murphy had a monthly surplus of $1,128. The officer multiplied this figure by 60 months (a reasonable period until Murphy could expect to retire) for a total of $67,680 in available income. The officer then added realizable equity to conclude that Murphy could offer to pay $82,164 to settle his tax liability. 26 Murphy has never mounted a serious challenge to these calculations. After complaining to the appeals officer that her proposed compromise figure was too high, Murphy never offered an explanation for why the officer's calculations were unreasonable. Even now, Murphy offers only a conclusory allegation that the appeals officer's calculation was preposterous. On this record, the IRS did not abuse its discretion in rejecting Murphy's offer-in-compromise. 3 27 Affirmed.