Interesting OIC case

[kcjenkins]

Samuel v. Commmissioner of Internal Revenue Service, No. 8431-05L (U.S.T.C. 10/15/2007) (U.S.T.C. 2007)

The Judge ruled that the IRS abused their discrection in rejecting the offer, something we have been seeing a lot of lately. Check it out.

[jainen]

>>The Judge ruled that the IRS abused their discrection in rejecting the offer<<

That's not exactly what happened. I mean, that's technically what the decision said but the devil is in the details.

The taxpayer, a non-filer, offered $30K to settle a debt of 3/4 million. The IRS noted substantial cash proceeds from recently selling a business and refinancing the home, and asked for a counter-offer to include that. The taxpayer refused.

The court simply gave the taxpayer another chance to submit the same counter-offer that the IRS had already asked for. It did say the taxpayer could reduce the amount of cash proceeds by relatively small sums that had already been paid for taxes, child support, and legal fees, but it agreed with the IRS that his original offer was "far below his available income/earnings." In fact, the court's judgment was that an appropriate offer would be $107,000, considerably more than the $58,000 that the IRS had determined to be the actual collection potential.

[kcjenkins]

Thanks for that feedback. It does make it more interesting. I have not had time to read the whole case yet.

[jainen]

>>I have not had time to read the whole case yet.<<

It's a good example of a "moral victory." So the IRS got slapped down for abusing its discretion--whoop-di-do. Their own numbers show the IRS had a LOT of room to negotiate, and "winning" cost the taxpayer fifty thousand dollars.

In fact, it could be a lot more. The court didn't order the IRS to accept the offer, just to not reject it without more analysis. Take a look at the letter the IRS sent -- they were not considering the value of his OTHER business. The lawyer should have recognized that warning. I think he did a terrible job.