And Chenery attends the funeral. That’s the story of Estate of Jacqueline R. Farwell, Deceased, Bruce Farwell, Personal Representative, T. C. Memo. 2025-95, filed 9/28/26. The late Jacquline (that’s Doc Jacqueline), before she became the late Doc Jacqueline, worked out an OIC with the aid of her trusty attorney. Before IRS could issue the acceptance letter, Doc Jacqueline died. IRS discovered her death and revoked the OIC. Trusty attorney, having been automatically discharged by his client’s death, asked for time to be retained by the PersRep, got retained, and sought reinstatement. Much back-and-forth followed, which Judge Vasquez chronicles.
IRS relies on IRM 5.8.7.5 (Oct. 7, 2016), which says OIC dies with taxpayer. Trusty attorney interposes Reg. Section 301.7122-1(e)(5). This, claims trusty attorney “expressly prohibits the IRS from reopening an accepted OIC unless one of three exceptions applies: (1) false information; (2) concealment; or (3) mutual mistake.” T. C. Memo. 2026-95, at p. 5. Moreover, “(T)he Estate emphasized that COIC’s termination letter was invalid as it focused only on Dr. Farwell’s death and failed to invoke any of the three reopening exceptions as the basis for terminating consideration of the offer.” Idem.
Judge Vasquez doesn’t buy it.
“Section 7122 and its accompanying regulations do not expressly address the administrative treatment of an OIC when the taxpayer dies before written acceptance. The IRM addresses that circumstance. IRM 5.8.7.5(1) states that ‘[c]onsideration of an offer must be terminated upon the death of a single proponent.’
“Although the IRM does not have the force of law, this provision is consistent with and complements section 7122 and its accompanying regulations by prescribing administrative procedures for circumstances like those presented here. Applying the IRM guidance, Appeals determined that as of… the date of Dr. Farwell’s death, COIC no longer had authority to accept Dr. Farwell’s OIC. Accordingly, COIC’s … notification of acceptance could not and did not create a valid and binding compromise. Appeals does not abuse its discretion when it adheres to applicable IRM guidelines in evaluating a collection alternative.” T. C. Memo. 2026-95, at pp. 10-11.
But trusty attorney has another argument. When he raised mutual mistake (the fact that Doc Jacqueline had died), Appeals went back and forth with him before denying mutual mistake. Hence Chenery binds them to that, and the IRM is out of the picture.
No, says Judge Vasquez, “The COIC letter makes no mention of the reopening exceptions or mutual mistake. It was only after the Estate raised the reopening exceptions that Appeals asserted that this was a situation of mutual mistake. While Appeals did discuss mutual mistake, it was alongside its consistent position that the IRS lacked authority to accept an offer from a deceased taxpayer. The administrative record contains consistent references to IRM 5.8.7.5. Most significantly, the Notice of Determination, while mentioning mutual mistake in the context of administrative history, does not reference it at all in the summary of its rationale. Instead, the Notice of Determination states that ‘[t]he Offer was initially accepted; however, it was rescinded once it was realized that the taxpayer had died prior to the acceptance of the offer. Appeals is in agreement with that determination.'” T. C. Memo. 2026-95, at p. 12.
Trusty attorney raises dispute as to underlying liability, but proffered no evidence at the CDP, so deemed waived.
But he does claim prohibited communications between Appeals and Collections. No go.
“The governing revenue procedure is clear that making inquiries to ensure all legal requirements are met is the Appeals officer’s responsibility in a CDP hearing and that all communications made for this purpose are permissible. Rev. Proc. 2012-18, § 2.03(10)(b), 2012-10 I.R.B. at 460. Asking Collections for guidance and informing COIC of Dr. Farwell’s death did not compromise Appeals’ independence or violate the ex parte rules. To the contrary, the actions of Program Analyst Hallman and SO Patterson exemplify Appeals’ independence. Their actions demonstrate active verification of legal compliance rather than a mere rubberstamping of COIC’s acceptance. Accordingly, we find that Appeals did not engage in any prohibited ex parte communications.” T. C. Memo. 2026-95, at p. 13.
The OIC is out, but trusty attorney gets a Taishoff “Good Try, First Class,” going down with all guns firing and the battle flag nailed to the topmast.
