No, this is not about landing your aircraft. I’ve never done that and don’t know how. This is about an OIC based on Effective Tax Administration, hereinafter referred to as “ETA.”

Writing the checklist is Judge Kerrigan, now warming up for the big Eaton Corporation and Subsidiaries trial, eventually coming to a blog near you maybe so.

The case is Lynn Edward York and Cynthia Lee York, 2015 T. C. Memo. 159, filed 8/13/15.

The Yorks want an OIC based on ETA. They’re long-haul truckers who filed for five tax years but didn’t pay all that was due, so they’re about $27K in the hole.

The SO sent the Yorks a letter setting up a teleconference, but the Yorks claimed that didn’t understand that was the purpose of the letter, so they skipped the teleconference.

“The letter explains clearly the purpose of the call and requests information from petitioners. A settlement officer has the discretion to decide when to end the administrative CDP proceedings where requested information and/or completed forms are not provided to her. See sec. 301.6330-1(e)(3), Q&A-E9, Proced. & Admin. Regs. It was not an abuse of discretion for the settlement officer to recommend the notice of determination be sustained as a result of petitioners’ failure to provide the requested information in a reasonable time.” 2015 T. C. Memo. 159, at p. 7. (Citation omitted).

OK, so the SO can kick the CDP. We know all that. But how about ETA?

“The Secretary may compromise a liability on the ground of effective tax administration when: (1) collection of the full liability will create economic hardship or (2) exceptional circumstances exist such that the collection of the full liability would undermine public confidence that the tax laws are fairly and equitably administered. Speltz v. Commissioner, 124 T.C. 165, 172-174 (2005), aff’d, 454 F.3d 782 (8th Cir. 2006); sec. 301.7122-1(b)(3), Proced. & Admin. Regs.” 2015 T. C. Memo. 159, at p. 8.

For economic hardship, look at long-term illness or disability, obligation to care for dependents, or assets that cannot be used to secure loans, or, if sold, would leave petitioner unable to meet basic living expenses (per IRS guidelines).

The Yorks strike out on all three economic tests, on their own numbers.

As for special circumstances, they don’t allege any, but Judge Kerrigan will give us some examples anyway.

“The Secretary may enter into a compromise to promote effective tax administration where compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for compromising the liability. A compromise will be justified only where, because of exceptional circumstances, collection of the full liability would undermine public confidence that the tax laws are being administered in a fair and equitable manner. A taxpayer proposing a compromise on the basis of effective tax administration will be expected to demonstrate circumstances that justify a compromise even though a similarly situated taxpayer may have paid his liability in full. Examples of cases where a compromise is allowed for purposes of public policy and equity include: (1) a taxpayer who was hospitalized regularly for a number of years and was unable to manage his financial affairs incurs significant tax liabilities, penalties, and interest and (2) a taxpayer learns at audit that he received erroneous advice from the Internal Revenue Service and, as a result, is facing additional taxes, penalties, and additions to tax.” 2015 T. C. Memo. 159, at pp. 9-10. (Citations omitted).

For more about ETA, see my blogpost “Leftovers,” 3/19/14.