Petition for Writ of Certiorari — Holloway v. United States

NO.

° . / x

OO Lat S A py Sugene Coun. US,

i

eC 15 \367

* JOSEPH F. SPANIOL, JR.

Bleek

SUPREME COURT OF THE UNITED STATES

LAWRENCE M. HOLLOWAY and

ROFNA J. HOLLOWAY,

Petitioners.

Resvondent,

ON APPEAL FROM THE JUDGMENT OF THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

ROBERT J. SOLNER

SOLNER & SOLNER, P.C.

Attorneys for

Petitioners

30300 Telegraph Road,

Suite 177

Birmingham, MI 48010

(313) 647-8650

EDITOR'S NOTE:

THE FOLLOWING PAGES WERE POOR HARD COPY

AT THE TIME OF FILMING. IF AND WHEN A

BETTER COPY CAN BE OBTAINED, A NEW FICHE

WILL BE ISSUED.

STATEMENT OF THE QUESTIONS

PRESENTED FOR REVIEW

1. WHETHER "DUE COURSE" IN AN OFFER

IN COMPROMISE IS TO BE DETERMINED BY THE

"REGULAR PRACTICE AND PROCEDURE OF TE

GOVERNMENT" RATHER THAN STANDARD CONTRACT

LA\’ WHERE THE RESULT IS A SEVEN AND -ONE-

HALF (7-1/2) YEAR DELAY BETWEEN THE OFFER

2e. WHETEER THE GOVERNMENT'S FAILURE

TO PROCEED IN DUE COURSE IS THE EQUIVA-

LENT OF REJECTING THE OFFER IN COMPRO-

MISE, THxo STATUTE OF LIMITATIONS THEREBY

RUNNING?

3. WHUTHER THE TAXPAYERS ESTAB-

ISHED A PRIMA FACI® CASE OF THE GOVERN-

MENT'S FAILURE TO CONSIDER THEIR OFFER IN

COMPROMISE IN DUE COURSE OR IN ACCORDANCE

WITH THE REGULAR PRACTICE AND PROCEDURE

OF THE IRS WHEN THE OFFER COULD NOT EVEN

BE CONSIDERED NOR ACTED UPON AS IT WAS

NOT PROPERLY EXECUTED PER THE IRS' OWN

maAr?IT moO ATT. DHmaArITAmM NS?

| u if we

1U daw AD SULATIONS

ee ee ae

Statement

Presented

Table of

TABLE OF CONTENTS

of the Questions

for I a ol a es

Ee

Reports of Opinions Below.....ccccccccccdt

tatement of Grounds on which

Jurisdiction is Invoked...cccccccccccceldl

Regulations which the Case Involves....5

Statement of the Case....ccccccccececech

DP UGCPECCERCC Conese bd geeeeseeecdeaks

Annendix

A - Oninon of the Court of

DUMERMG Wh Ge REG ben sesonkedevececees 35

Avnendix

Court

Appendix

Court

Appendix

Apvendix

Court

Annendix

Court

Appendix

B = Ovinion of the District

dated January 11, 1985.......30

C = Opinion of the District

Gated May 12, -1980....cccceocchO

D - Offer in Compromise..Lodged

with the Court

E- Order of the District

Gatec December 16, 1971......55

F —- Judgement of the District

dated January 11, 19&5.......62

G - Order of the Court of

Appeals denying Motion for

a

- 32-

Appendix H - Exhibit 5700-19 -

Irternal Revenue Manual..........-.05

Avvendix I - Exhibit 5700-36 -

Internal Revenue Manual..cccccccceee lV

Appendix J = Exhibit 5700-37 -

Internal Revenue Manual..ccccccccceel 3

REPORTS OF OPINIO:iS BELOW

Appendix

Page

United States Court of

Appeals Opinion No. 85-1128

filed August 18, RO ea is ts a

United States District Court

Tastern District of Michigan

Southern Division - Flint

“Memorandum Ovinion and

Order No. 76-72023 filed

6 Ne ee Ne a re |”

United States District Court

Eastern District of Michigan

Southern Division - Flint

Memorandum Opinion and Order

No. 76-72023 filed May 12, 1960.....46

STATEMENT OF GROUNDS ON WHICH

JURISDICTION IS INVOKED

(i) United States Court of Appeals

Ovinion No. 85-1128 decided and

filed August 18, 1986. 28 U.S.C.

ao hie

1254(1).

(ii) United States Court of Appeais

Order denving Defendants/

Avpellants' Petition for Rehearing

filed September 15, 1956.

(iv) A federal Court of Appeals has

decided an important question, of

federal law which has not been, but

should be, settled by this Court.

USC Rule 17.1(c).

REGULATIONS WHICH THE CASE INVOLVES

Internal Revenue Regulation Sec.

601.202(a)

See page 20 of Argument

Tnternal Revenue Refulation Sec.

301.7122-1

See Page 20 of Argument

2 Administration, CCH Internal Revenue

Manual, para.'s 57(10)7.2, 57(10)(21).1,

57(10)2.1, 57(10)2.27, 57(10)3.1,

57(10)3.2, 57(10)6.32 and 6.331,

57(10)7.1, 57(10)7.51, 57(10)7.521 and

7.522, and 57(10)(23).73

See Pages 14-16; 21-32 of Argument

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r 21, 1964, determined

fencies in the income and

ions to taxes due from

in the amount of Ninety

Yundred Eighty-Four Dollar

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“5

STATEMENT OF CASE

*ants ($90,456 yo

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criminal

the

because

followays

Ly

filing of a fraudulent Offer In Com-

inancial Statement.

On May 20, 1970 the U.S. Government

indicted in Count I both Defendants/

Apnellants for knowingly and wilifully

filing a false Statement of Financial

condition and Other Information and

charzed that Lawrence Holloway claimed

the ownership of assets having a fair

ket value of Four Thousand Four Hun-

dred Dollars ($4,400.00) when he in fact

had and knew he had, additional assets

havine a fair market value of Twenty-Four

rn

usand Four Hundred Twenty-Six Dollars

16, 1971, wherein the Court held

that the vnre-indictment delay by the gov-

ernment, under the circumstances of this

case, seriously impaired the Defendants'

abilitv to present a defense. A copy of

the Order of Judre Roth is attached

hereto in the Appendix page 55.

The Government's appeal from the

Gismissal of the indictment was dismissed

on February. 21, 1972.

On June 12, 1972, the Internal

Revenue Service wrote to the Defendants

indicating the IRS could not proceed on

the Offer In Compromise until form 433

from Lawrence M. and Roena J. Holloway

was updated and delivered to them.

On February 13, 1973, the Internal

Revenue Service mailed a letter to the

Yolloways notifying them that their Offer

In Compromise was rejected for the

reasons that (1) the Defendants had not

furnished the necessary information for a

-93-

field examiner to determine the merits of

the Offer, and (2) the incomplete inves-

tigation of the Offer showed that the

amount apneared to be less than that

which could be collected. That the neces-

sary financial information had not been

furnished was clear upon sudmission of

the Offer in 1965 because Mrs. Holloway

had never signed the financial informa-

tion form in the first instance.

On September 30, 1976, the Govern-

ment filed this action in the District

Court to reduce the 1964 tax assessments

to a Judgment in the amount of One

Hundred Lightv-Nine Thousand Seven dHun-

dred Sixty¥Four Dollars and Thnirty-Seven

Cents ($189,764.37) plus interest from

June 1, 1976.

Both narties thereafter filed

Motions for Summary Judgment which the

ae |:

District Court denied in a written

opinion dated May 12, 1980. The Honor-

able Stewart A. Newblatt was persuaded

that a genuine issue existed as to

whether or not the Government proceeded

in due course in considering the Offer In

Compromise, as required by the contract,

and set the matter for an Evidentiary

Hearing. A copy of the Opinion is

attachec hereto in the Appendix page 46.

The Evidentiary Hearing was held on

July 23, 1980.

On the Government's renewed Motion

for Summary Judgment, the District Court

granted its Motion For Summary Judgement

in a written opinion dated January 117

1985. A copy of the Opinion and Order is

attacned hereto in the Appendix page 39.

Judgment was entered on the same date, a

copy of which is attached in the Appendix

page 62.

The District Court's decision was

appealed to the United States Court of

Appeals for the Sixth Circuit on or about

February 6, 1985. Oral Arguments were

heard on July 25, 1986 and the Court's

Ovinion affirming the District Court's

Judgment was decided and filed on August

18, 1986. Holloways filed a Petition and

Brief for Rehearing on September 2, 1986,

which was denied by Order of the Court

dated Sentember 15, 1986, a covy of which

Order is attached in the Anvendix page

64,

a

ARGUMENT

Issue One

Issue Two

The contractual language Eontuined

in the Offer, drafted by the Government

and therefore strictly construed against

them, states as follows: "...this offer

will be considered and acted upon in due

course," during which time period the

taxpayer agrees to the suspension of the

statute of limitation waiving any benefit

during the period. The Government relies

on the case of U.S. v Cooper-Smith, 310

F.Supp.479 (ED NY, 1970), aff'd 439 F.2d.

t09> 40m 92, 2971) in arguing that "due

course" depends on the regular practice

and procedure of the Government. The

Government is contending that regular

practice and procedure allows for a seven

and one-half (7-1/2) year delay between

“a

the Offer being submitted and rejected in

writing.

Petitioners argue that the six-year

statute of limitations which was tolled

by their offer of compromise began to run

again when the Internal Revenue Service

referred the matter to the Department of

Justice for possible criminal proceed-

ines. Petitioners further argue that

this was an implied rejection of the

offer of compromise and that no with-

drawal by them or formal rejection by the

IRS was necessary to start the statute of

limitations running again.

The Internal Revenue Manual itself

makes clear that tne Offer is to be

construed according to contract law, as

follows:

57(10)7.2

PUBLIC POLICY

ee

(1) An accepted offer, like

any contract, is an agreement

between two parties resulting

from a 'meeting of the minds'.

rhe Service...represents the

government's interest in the

negotiations...(Emphasis Added)

e Administration, CCH Internal

Revenue Manual, para. 57(10)7.2

Special Procedures at 7339.

57(10) (21)

Rescission of Accepted Offers

§7(10)(21)..1

General

(1) A compromise is a contract

which is binding and conclusive

on both the Government and the

proponent anc precluces further

inquiry into the matters to

wniech it PYreiates. In the ab-«

sence of fraud or a mutual mis-

take, the courts have consis-

tently denied either party

recovery Of any part. -of the

consideration given with a set-

tlement when it was proverly

rendered under a compromise

arreement. However, an offer

in comvromise which has. been

accepted under a mutual mistake

as to a material fact, or

because of the false represen-

tations made by one party about

a material Tact. may be

rescinded or set aside. The

meaning, validity and consider-

ation of such a contract is

subject to interpretation bv a

ae te

court. Emphasis Added) 2

Administration CCH Internal

Revenue Manual, para. 57(10)

(21).1, Special Procedures, at

1379.

Under general contract law, if no

time is fixed in the offer within which

acceptance must be made, it is a general

rule that accentance must be within a

reasonable time. 1 Williston On Con-

tracts Sec. 54, pp 172-173 (3rd. ed.);

Rubsam v Harley C. Loney Co., 117 F.

Suvp. 164, aff'd 217 F.2d.353, cert

denied 76 S. Ct. 69, 350 U.S. 833, 100

L.Ed. 744, rehearing denied 76 S.Ct. 149,

350 U.S. 898, 100 L.Ed. 789. Where

ambiguous lanfuage is used in limiting

the time for acceptance, i.e., “in due

course", its meaning should be determined

by what the taxvayers reasonably under-

stood the Government to have intended.

See The Law of Contracts, Simpson, Sec.

i De

20, pp 24-25 (2d.ed., 1965).

In the case at bar, seven and one

half years is clearly not reasonable, nor

could it be argued the taxpayers reason-

ably understood that "in due course"

meant such an excessive lensrth of time.

Further, under general contract law,

the power of acceptance is terminated by

illegality sunervening between the makingr

of an offer and its acceptance. The Law

of Contracts, Calamari and Perillo, Sec.

33, p 61 (lst. ed., 1970); Restatement,

Contracts Sec. 50. The Michigan Supreme

Court in Krause v Boraks, 341 Mich 140,

155 (1°54) further held as follows:

All contracts which are founded

on an act prohibited by a stat-

ute under a penalty are void

although not expressly declared

to be so and neither law nor

eouity will enforce a contract

mace in violation of such a

statute or one that is in

violation of public policy.

Jaenicke v Davidson, 290 Mich

295.

« 17 =

It is therefore clearly arguable,

under basic contract law, that the offer

was rejected when the case was referred

to the Department of Justice for criminal

proceedings to be instituted against

Appellants on October 18, 1968, because

of the filing of an alleged fraudulent

Offer In Compromise and Financial State-

ment.

Petitioners disagree with the analy-

sis of the Sixth and Fifth Circuits in

their adontion of the reasoning of the

Ressler court in United States v Ressler,

576 F.2d. 650, 652-53 (Sth Cir. 1978), in

that such reasoning nvlaces' the entire

burden on the taxpayer to withdraw his

Offer after indictment or an unreasonable

length of time while placing no resvpons-

ability on the government to act reason-

ably allowing abuses under the guise of

their "regular practices and procedures"

which is clearly inconsistent with basic

contract law and the government's alleged

position that the Offer in Compromise is

a contract.

Issue Three

The Offer together with Form 433

executed onlv by Lawrence Holloway were

submitted by Taxpayers on June 10, 1965

and accepted for consideration or pvroces-

sine by the IRS on June 18, 1965. The

IPS' acceptance of this non-processable

Offer and their failure to immediately

return the Offer to the taxpayers for

completion while accepting the benefits

of the taxpayvers' waiver of the Statute

of ket ecetuns was clearly not in accord-

ance with their regular practices or

procedures which is the definition

adopted for acting in "due course” by the

Sixth Circuit Court herein and the Second

Circuit in United States v Cooper-Smith,

310 F.Supp. 479, 482(E.D. N.Y. 1970),

aff'd, 439 F.2d 1095 (2nd Cir. 1971).

Internal Revenue Regulation Sec.

601.203(a) states that Offers in Compro-

mise must be submitted on Form 656 "prop-

erly executed and accompanied by a

financial statement on Form 433", and

Regulation Sec. 301.7122-1 requires that

IRS' forms be used and further states as

follows in Sec. 4.02:

Sec.4. GENERAL GUIDELINES

PELATING TO THE ACCEPTABILITY

OF Aili OFFER IN COMPROMISE...

-O2 A Statement of Financial

Condition and Other Informa-

tion, Form 433, signed by the

taxpayer, is required in a

offer in compromise cases based

on the taxpayer's inability to

pay the total amount due,

regardless of the type of tax

or amount of liability

involved. (Emphasis added)

o 26 =

Further, under the regular practices

and procedures of the Government, the

offer, if accepted, is an agreement to be

interpreted under the law of contracts

i.e., the offer must be definite in its

terms and conditions, therefore, where

there is a sienificant error or omission

in the offer, the offer cannot be ac-

cepted and the waiver acceptance should

not be completed by th IRS until the

offer is processable as the Internal

Revenue manual makes clear:

57(10)2

Preparation of the Offer (Form

656)

§7(10)2.1

General

(1) The offer in compromise is

the taxpayer's written proposal

to the Government and, if ac-

cepted, is an agreement en-

forceable by either party under

the law of contracts. There-

fore, it must be definite tn

its terms and conditions.

« 21 -«

(2) All offers in compromise

must be submitted on Form 656.

The taxpayer submitting the of-

fer will complete all relevant

items on the forms and file the

original and one copy with the

service center serving the dis-

trict office where the tax-

vayer's liability is or would

be outstanding, regardless of

where the taxpayer legally

resides or has its principal

place of business. See Exhibit

5700-19.

(a) Whenever an offer is

submitted to a district office,

the receiving emplovee should

review the offer to ensure its

adequacy, for further proces-

Sing. if there are significant

errors or omissions, sucn as:

Tilecal identification of Ifa-

bility, no amount offered, lack

of signature, Form 433 missing

@etc., the receiving district

Office employee will return the

offer to the proponent with a

note specifying what must be

corrected or added before offer

processing can begin. The

waiver acceptance should not be

Completed until a processabvle

offer is received. pxnidit

5700-10 presents a checklist

which may be used as a guide to

determine if Form 656 has been

prepared correctly. when a

vrocessable offer is received

from the proponent, the receiv-

ing employee should complete

a 22 «

acceptance of the waiver of

Statutory period by signing or

securing the signature of an

appropriate delegated official

in the lower left corner of

Form 656 and promptly forward

it to the service center.

(>) The taxpayer may cor-

rect the offer by either:

l1 entering and ini-

tialinge the changes on the Form

656 submitted, or

2 filing a new Form

656.

(3) Form 433, Statement of

Financial Condition and Other

Information, must accompany

Form 656 when an offer is basec

wnolly or partly upon doubt as

to collectibility. (Emphasis

added) 2 Administration, CCH

Internal Revenue Manual, para,

57(10)2.1 at 7331.

Attached hereto in the Appendix page

65, is the form 656 Checklist referred to

above which makes clear Form 433 must. be

attached to the Offer in this case.

The following IRS Manual provisions

further substantiate that a "complete"

= 23 -

Form 433, i.e., signed by both taxpayers

in this case, must be submitted or the

offer must be corrected or rejected by

the IRS immediately as insufficient for

processing:

S7(10})2.,27

Grounds For Offer

Item 7 of Form 656 is to be

used for giving the facts and

reasons why the offer in com-

promise should be accepted. If

the offer is based only on

doubt as to collectibdility, it

is only necessary to state, ‘lI

cannot pay these taxes,' since

a financial statement must

accompany the offer. (Emphasis

added) 2 Administration, CCH

Internal Revenue Manual, para.

57(10)2.27 Special Procedures

at T3si3e

57(10)3

Preparing the Financial State-

ment

57(10)3.1

Prescribed Form

(1) A taxpayer seeking to com-

promise a tax liability based

on doubt as to collectibility

rust submit Form 433, Statement

of Financial Condition and

Otner Information.

i SE me

(2) All items on Form 433 must

be completed. To avoid any

misunderstanding, enter "none",

"N/A", "not applicable", or

other similar entry for those

items that do not apply to a

particular taxpayer.

(3) If the taxpayer submits

additicnal documents or other

financial statements to supple-

ment Form 433, thev must be

clearly referenced@ on Form 056

and conclude with the tax-

paver's signed declaration

uncer penalties of perjury.

57(10)3.2

Refusal to Submit Financial

Statement

b> a taxpayer ovrofessing

inability to pay on Form 656

does not submit the requirec

Form 423, the offer will be

immediately returned to the

taxpayer. As the Service can-

not begin to determine whether

the amount offered is also the

maximum amount collectible, the

offer will be considered as

insufficient for processing.

(Emphasis added) 2 Administra-

tion, CCH Internal Revenue

Manual, paras. 57(10)3.1 and

3.2, Collection Activity at

7334.

As the Manual specifically addres-

ses, the IRS' own procedures require the

IRS to act promptly on all offers and

summarily reject those which do not

include a complete Form 433 when based on

inability to vay:

57(10)6.32

Transcript of Tax Accounts

(1) In order that the district

office may act vromptly on all

offers in compromise, the ser-

vice center sends the offer

file without computer tran-

scripts of account. Tran-

scripts will be forwarded to

the district by the requesting

service center upon receipt

from the National Computer

Center...(Emphasis added)

% = F

57(10)6.331

Special Procedures Function Ac-

tion

(1) All offers (except those

under jurisdiction of the dis-

trict Examination function)

will be forwarded to SPf from

the service center...

a 26 @

(2) SPF will take the fol-

lowing actions:

(a) Review the offer file

for completeness...

(3) All remaining offers will

be subject to initial review in

SPf prior to assignment for

field investigation. SPf may

recommend summary rejection of

any offer determined to be

frivolous, intended to delay

collection, a potential fraud

case, where there is no basis

for compromise, or the taxpayer

refuses to submit a complete

Form 433 (See IRM 57(T1I0)7.1)

(Empnasis added) 2 Administra-

tion, CCH Internal Revenue

Manual, paras. 57(10)6.32 and

67.331, Special Procedures at

1337.

57(10)7

Investigation of Offers

YES ep yee!

General

(1) Once an offer in comvro-

mise. i8 frecéiveac in Special

Procedures function, a ceter--

mination whether the offer

merits further consideration

must be made. SPf should use

all information contained in

the offer file and may consult

with the revenue officer

assignec the TDAs to obtain

additional financial informa-

~ or ..

tion or verify existing infor-

mation.

(2) Summary rejection in SPf

can be made on the grounds that

the offer is frivolous, was

filed merely to delay collec-

tion, or where there is no

basis for compromise. Although

not all inclusive, the fol-

lowing list provides guidelines

on tne criteria for summary

rejection most often encoun-

TEFEds wc0

(d) The taxpayer refuses

to submit a complete financial

statement (Form 433)...

(3) When SPf determines that

the offer should be summarily

rejected, the procedures in IRM

57(10)(13).2(4) will be fol-

lowed in preparing Form 1271,

Rejection or Withdrawal Memor-

andum...

(5) Since an initial review of

the offer ‘in compromise has

been made by SPf (varagraph (2)

above), an offer received by

the field examining officer

will, in most -cases, merit

further consideration. Form

656, Form 433, if it applies,

and all related documents

should be reviewed to determine

4 course of action and a basis

for an acceptable offer prior

to meeting witn the taxpayer.

(Emphasis added) e2 Administra-

ao 26 se

tion, CCH Internal Revenue Man-

ual, para. 57(10)7.1, Special

Procedures at 7339,

57(10)7.51

Determination of Adequate Offer

%* &

(2) The investigation of

offers based on inability to

pay requires comprehensive

analysis by the examining

officer to ascertain the tax

payers ability to pay:... (mm

phasis added) > Administration,

CCH Internal Revenue Manual,

para. 57(10)7.51, Collection

ACtIiVity at 73h,

57(10)7.521

Svecial Procedures Function

Investigation

(1) All offers with total tax

liability below $10,000 ini-

tially will be assigned to SPf

for investigation...information

contained on Form 433-f ana

verified by a revenue officer

would normally be sufficient

ror Of7er in compromise pur-

oses (tax liability under

910,000), if it appears that

the taxpayer's financial cone

dition has not changed appreci-

ablv.

- 29 -

(4) Since Form 433 will be the

primary source of financial

information for this examina-

CLoOn: offer investigations

snould be completed as soon as

possidle to ensure tnat_ the

financial statement refiects

the taxpayer's current finan-

cial condition. Before recom-

mending acceptance, the exam-

ining officers will review the

taxpayer's latest income tax

return to verify that the

assets and liabilities listed

on Form 433 are complete and

accurate,

STC1LOF7. See

Field Investigation

(1) Offers with total tax

liabilities $10,000 or more

will be assirened to the field

examining officer. Before

arranging an appointment with

the taxpayer for a thorough

examination of the offer, the

field examining officer should

make a comprehensive review of

the offer, the financial state-

ment and all other information

in the file...Assets or liabil-

ities appearing on a financial

statement or other record sup-

plied by the taxpayer should be

verified in writing or in

person by the examining of-

ficer.

» 30 «

(5) Offer investigatiors

should be completed aS promptiy

as possible. Before an offer

is recommended for acceptance,

the examining official will

review the taxpayer's latest

income tax return (1040, 1120,

etc.) for any assets oor

sources of income not listed on

the Form 433.

= = ¢

(7) The taxpayer's financial

statement should be verified to

ensure that it reflects’ the

current financial position of

the taxpayer. Courtesy inves-

tigations should be initiated

whenever necessary to verify

information. An updated Form

433 will not be necessary

during the offer examination...

(Emphasis added) e2 Administra-

tion, CCH Internal Revenue Man-

waa. peras. $7(1037.5el and

7.522, Special Procedures at

7343-7345.

It is interesting to note that under

the IRS Manual procedural rules, even a

proposal to compromise the balance of an

accepted offer, when based on doubt as to

~ Si =

collectibility, must be submitted with a

complete Form 433 even though no offer

form (such as Form 656) is prescribed for

use in submitting such a proposal. See 2

Administration, CCH IRS Manual, para.

57(10)(23).73, Collection Activity, at

7388.

Attached hereto in the Appendix

pages 70 and 73, are sample rejection

letters contained in the IRS Manual which

support Petitioners position that the

Offer herein should have been immediately

rejected by letter as not containing

sufficient information to enable the IRS

to determine its adequacy as it was not

legally acceptable as submitted.

Finally, under general contract law

and according to the Michigan Supreme

Court in Bitulithic Paving Co. v Highland

Park, 164 Mich 223, 228 (1910):

ae | ae

---But a contract is not made

so long as, in the contempla-

tion of the parties thereto,

something remains to be done to

establish contract relations.

The law does not make a con-

tract when the parties intend

none, nor does it regard an

arrangement as completed which

the parties thereto regard as

incomplete.

The IRS in the case at bar accepted

and received the benefit of the waiver of

the statute knowing full well the offer

as Suomittec was not ovrocessable as

containing a significant omission be@e,

Mrs. Holloway's signature on Form 433,

which was clearly in violation of their

Own procedural mandates and not in ac-

cordance with rerular practice. The IRS

did not act in due course as that term is

defined by the Sixth Circuit and the

caselaw below.

WHEREFORE, Petitioners Lawrence M,.

anc Roena J. Eolloway pray this Honorable

Court g¢rant this Petition for Certiorari

as Taxpayers' Offer In Compromise was not

acted upon in “due course" or in accor-

dance with the regular vractice and pro-

cedure of the IRS.

Resvectfully submitted,

ee

/ ROBERT J. SOLNER (P20771)

ls

SOLNER & SOLNER, P.C.,

Attorneys for Defendants/

Avpellants

20300 Telegraph Rd., Ste. 177

Rirmingham, Michigan 48010

(313) 647-8650

RECOMMENDED FOR FULL TEAT PUBLICATION

See, Sixth Circuit Rule 24

No. 85-1128

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Unrtep States OF AMERICA, )

Plaintif-Appellee, | Ox Appear from the

v. United States District

LAWRENCE M. HOLLOWAY; ROENA Court for the Eastern

J. Howwoway, District of Michigan.

Defendants-Appellants.

Decided and Filed August 18, 1986

Before: LIVELY, Chief Judge; KENNEDY and

MILBURN, Circuit Judges.

PER CURIAM. The defendants, husband and wife, appcal

from an order of the district court granting summary judg-

ment to the United States and reducing to judgment certain

income tax assessments. The Tax Court determined deficicn-

cies in the defendants’ income tax returns for the years 1950

to 1957 and 1960. This determination was made on October

30, 1964. On June 18, 1965 the defendants submitted an offer

in compromise, which both of them signed, to satisfy all out-

standing liabilities. A statement of financial condition, signed

only by Lawrence M. Holloway, was submitted with the offer

and showed his total assets to be about $4,400 and his liabili-

- 35 -

ties at approximately $240,000. The printed offer of compro-

mise form contained the following provision:

The undersigned proponent waives the benefit of

any statute of limitations applicable to the assess-

ment and/or collection of the liability sought to be

compromised, and agrees to the suspension of the

. funning of the statutory period of limitations on

assessment and/or collection for the period during

which this offer is pending, or of the period during

which any installment remains unpaid, and for |

year thereafter.

On February 3, 1966 the Internal Revenue Service (IRS)

assigned the defendants’ offer to special agents for investiga-

tion of possible fraud and on October 18, 1968 the matter

was referred to the Department of Justice for consideration

of instituting criminal proceedings. The taxpayers were

indicted on May 20, 1970 for knowingly and willfully filing

a false statement of financial condition and other informa-

_ tion. The district court dismissed these charges for pre-

indictment delay and thereafter the defendants’ offer of com-

promise was returned to the IRS collection division. On June

12, 1972 the IRS notified the defendants that the offer could

nat be processed unti] an updated statement of financial con-

dition was received. When the defendants failed to provide

further information the IRS formally rejected the offer of

compromise on February 14, 1973. On September 20, 1976

the government filed this action to reduce to judgment the

original 1964 tax assessments. Following an evidentiary hear-

ing the district court determined that the government had

proceeded in due course in considering the defendants’ 1965

offer and granted summary judgment for the United States.

Fite issue on appeal is whether the government filed this

actidirwithia-thetimitations period. In United States v. Ress-

ler, $76 F.2d 650, 652 (Sth Cir. 1978), the court stated:

The running of the statutory period is suspended

until the offer of compromise is terminated, with-

- 36 -

drawn, or formally rejected. See Afyrick v. United

States, 296 F.2d 312 (Sth Cir. 1961). In addition,

it is suspended for one additional year, as provided

by the terms of the offer.

The defendants argue that the six-year statute of limita-

tions which was tolled by their offer of compromise began

to run again when the Internal Revenue Service referred the

matter to the Department of Justice for possible criminal pro-

ceedings. They argue that this was an implied rejection of

the offer of compromise and that no withdrawal by them or

formal rejection by the IRS was necessary to start the statute

of limitations running again. The Ress/er court dealt with this

argument as well, stating:

We find no reason why proceedings in a criminal

matter should have any effect on whether even a

related civil matter can be compromised. There is

nothing necessarily inconsistent from the Govern-

ment’s standpoint in prosecuting for fraud and still

considering an offer of compromise of the civil lia-

bility for tax. A prosecuted taxpayer is not left

unprotected: if he thinks that his prosecution is

inconsistent with the acceptance of his offer of com-

promise, he can withdraw the offer upon notice to

the Government, and thus terminate the toll on the

statute of limitation.

Id. wt 652-53.

We agree with the analysis of the Fifth Circuit and adopt

the reasoning of Ress/er. Thus, the running of the statute of

limitations did not begin until the IRS formally rejected the

offer of compromise, which the defendants had never with-

drawn.

The defendants also argue fhat the district court erred in

finding that the IRS considered their offer of compromise in

due course. As the court held in United States v. Cooper-

Smith, 310 F. Supp. 479, 482 (E.D. N.Y. 1970), afd, 439

- 37 -

F.2d 1095 (2d Cir. 1971), “ ‘Due course’ depends on the regu-

lar practice and procedure of the Government.” The defen-

dants had the burden of demonstrating that their offer of

compromise was not acted upon in accordance with the regu-

lar practice and procedure of the IRS in order to prevail on

this contention. They made no showing to support such a

finding.

The judgment of the district court is affirmed.

- 36 -

APPENDIX B

United States District Court for the

Eastern District of Michigan, Southern

Division, Flint

No: 76-72023

UNITED STATES OF AMERICA, Plaintiff

Vv

LAWRENCE M. and ROENA J. HOLLOWAY,

Defendants

MEMORANDUM OPINION AND ORDER

Plaintiff failed this action on Sep-

tember 30, 1976, to reduce a tax assess-

ment to judgment. Both parties

thereafter filed Motions for Summary

Judement which the Court denied in a

written opinion dated May 12, 1980.

Before the Court is plaintiff's renewed

motion for summary judgment. The only

issue which must be adjudicated is

whether plaintiff processed defendants'

offer of compromise in due course. If

plaintiff did so, the limitations period

would be tolled and summary judgment on

behalf of the plaintiff would be appro-

priate. If not, then plaintiff effec-

tively rejected the offer at some point

prior to the Febdruary 1973 official

rejection thereby creating the possibil-

ity that some or all of its claims are

timebarred. (See p 3 of this Court's May

12, 1980 opinion.) If such is found to

be the case, plaintiff's renewed motion

must be denied.

ANALYSIS

As was the case at the time of the

Court's 1980 opinion, there is but one

reported case dealing with the "due

course" language of an offer to compro-

mise a tax liability. In U.S. v Cooper-

Smith, 310 F Supp 479 (ED NY, 1970) aff'd

439 F2d 1095 (CA 2, 1971), the Court in

« &O «

defining "due course" stated:

"Due course" depends upon the

regular practice and procedure

of the Government. There is no

showing here that this offer

was not considered and acted

upon in accordance with the

Government's regular practice

and procedure in cases of this

kinc. Moreover, at would

appear that in order to sustain

the defendant's argument, some

prejudicial connection would

have to be shown between the

alleged default and the

enforcement of the waiver

provision.

Id at 482.

In the instant case, defendants sub-

mitted their offer in compromise on July

18, 1965. In February, 1966, the offer

in compromise was referred to the Intel-

ligence Division because of the possible

existence of criminally fraudulent state-

ments. The criminal asvect of the case

continued until the February 21, 1972

dismissal of the appeal taken from the

“> a

trial court's decision dismissing the

indictment. Subsequently, the offer was

fully considered and officially rejected

on February 14, 1973. Since the offer

was held in abeyance during the 6-year

pendency of the criminal action, plain-

tiff took only about 1 1/2 years to

actually consider the offer. Given the

time needed to update the offer following

the close of the criminal action and the

press of other matters the review seems

to have been accomplished in "due

course."

As to holding the offer in abeyance

pending the criminal action, it must be

noted that since this was done in accord-

ance with established pvrocedure, it must

therefore have been done in "due

1 ; :

course." The criminal investigation

T Relving on US °weRessler, 576 Fed 650

(CA 5, 1978), defendants argue that the

compromise of the civil matter should not

x BD «

also was accomplished in "due course."

While it is true that the fieldwork took

over two years, the work was done in

accorcance with a set procedure in which

cases were given priority in accordance

with their resvective statute of limita-

tions date. Since the delay was caused

by an established procedure developed

vu

because of manpower shortages in the

field office, the two-year investigation

must be considered to have proceeded in

"due course."

The same can be said for the two-

year delay produced by a procedure iden-

have been held in abeyance since it would

not have been affected by the outcome of

the criminal investigation. Defendants

conclude that a sanction could not,

therefore, have been performed in "due

course." This argument misses the mark.

FiPOt it ignores the Cooper-Smith

definition of "due course." Second, its

underlying premise is mistaken. Surely,

fraudulent statements concerning the

value of the taxpayer's assets may affect

the decision to accept or reject the

offer in compromise.

ie

tical to that used by the IRS tieic

office in handing down the indictment

once the matter was referred to the

Department of Justice. As Willard

McBride, an attorney for the Criminal

Section of the tax Division of the

Department of Justice testified, cases

were given priority according to the

statute of limitations date. Since the

statute in defendants' case would not run

for some time, it was given a low

priority, hence the two-year delay. The

remainder of the criminal action took

only two years to complete and thus there

anvears to be no “due course” issue

oresent for this period of time.

Clearly then, although it took

plaintiff a considerable time to review

and ultimately reject defendants' offer

in compromise, plaintiff nevertheless

es

proceeded in “due course." Since the

first prong of the Cooper-Smith test is

not met, the Court will not consider

whether the delay resulted in prejudice

to the defendants. In light of the

evidence produced at the evidentiary

hearing it is clear that no _ genuine

issues of fact exist in the present

action and that plaintiff is entitled to

dudgment as a matter of law. Summary

judgement must therefore be granted to the

sor the reasons set forth above,

rlaintiffs motion for summary judgment is

nerebdy granted. Judgment shall be

entered accordingly.

IT IS SO-ORDERED.

Dated: 1/11/85 /s/STEWART A. NEWBLATT

United States District

Judge

i AS x

APPENDIX C

United States District Court for the

Eastern District of Michigan, Southern

Division

No: 76=-72023

UNITED STATES OF AMERICA, Plaintiff,

LAWRENCE M. and ROENA J. HOLLOWAY,

Defendants.

MEMORANDUM OPINION AND ORDER

At a session of said Court,

held in the Federal Building,

Flint, Michigan, on May le,

198¢.

PRESENT: HON STEWART A NEWBLATT

United States District

Judge

Plaintiff filed this action on

September 20, 1976, to reduce a tax

5 ae

assessment to judgment. Defendant raises

the Statute of Limitations as a defense.

Both parties have filed Motions for

Summary Judgment.

On October 30, 1964, the Tax Court

assessed income taxes for Defendants for

the years 1950-57 and 1060-62. On June

18, 1965, Defendants submitted an offer

of compromise to the Internal Revenue

Service (I.R.S.). On February 3, 1966, a

snecial agent of tne I.R.S. befan inves-

tigatins the possibility that the offer

contained fraudulent statements. On June

18, 1968, the case was referred to the

Justice Department because of the

susnected fraud. An indictment was

handed down on May 20, 1°70, and dismis-

sed on December 16, 1971. The. US,

appealea the dismissal, which appeal was

itself dismissed on February 21, 1972.

i

By letter dated February 14, 1973, the

offer was formally rejected.

Both parties agree that the applic-

able period of the Statute of Limitations

is six (6) years. The parties further

agree that the Statute is tolled while

the I.R.S. considers an offer of compro-

mise plus one additional year, a period

that began in this case on June 18, 1965.

The government argues that the tolling

ends when the offer is specifically

rejected. Alternatively, the government

surrests that even if one were to agree

with the holding of Coy v U.S., 377 F 2d

925 (9th Cir 1967), the offer would

remain onen until indictment. In either

event, the complaint would have been

timely filed, the limitations period

having expired on June 25, 1979 under the

first theory and on October 1, 1976 under

- 48 «

the latter.

Defendants maintain that the tolling

period ended when the matter was referred

to the Justice Department. It is on this

theory that Defendants base their Motion

for Summary Judgment. Alternatively,

Defendants argue that Summary Judement in

favor of Plaintiff is not aporopriate, as

there are unresolved factyal issues.

There is no case law to support

Defendants’ contention that the offer was

rejected when the auestion of fraudulent

Statements made in an offer of compromise

lead to an indictment for fraud, the

offer is deemed rejected at least on the

day of sentencing, and possibly on the

day of indictment. The Court reasoned

that the government could not ethically

proceed on an offer based or fraud, and

thus the offer was deemed rejected once

fraud was established. That theory,

though well reasoned, does not benefit

Defendants here, as the complaint was

filed one day prior to the exviration of

the Statute of Limitations as established

thereby. See also, U.S. v. Coover-Smith,

310 F Supp 779 (ED NY, 1970) aff'd with

opinion, 439 F 2d 1095 (2d Cir 1971)

(offer not rejected until taxpayer

officially notified of the same, despite

full payment of offer of compromise);

essler, 576 F 2d 650 (5th Cir

1978) (Criminal charge is separate from

civil complaint, and therefore filing of

indictment does not mean rejection of

offer).

As stated above, Defendants assert

alternatively, that Summary Judgement is

not appropriate, due to the existence of

factual disputes. Of those alleged, the

Court is persuaded that . genuine issue

exists as to whether or not the govern-

ment proceeded in due course in consider-

ing the offer of compromise, as required

by the contract.

Although the govern-

ment argues that such a finding is not

relevant, this Court agrees with Defen-

dants' contention that failure to proceed

in due course would, at some point, be

the equivalent of rejecting the offer in

comnpromise. Such a concept is basic

contract law, and the Court can think of

no reason the principle should not apply

here. This Court is aware of no statute,

2 Paragraph 7 of the offer in compro-

mise, signed by both parties, states in

relevant part: "It is understood that

this offer will be considered and acted

upon in due course..." See, exhibit C

attached to Affidavit of John DiCicco.

a §1 «=

regulation, or policy consideration which

would mandate that an offer of compromise

remains valid indefinitely regardless of

how much time passed. In fact, in a case

cited by the government, U.S. v. Cooper-

Smith, supra, id, the lower Court noted

that if the Defendants made a prima facie

case of lack of diligence and showed some

prejudice, they had raised a valid

defense to the collection attempt. The

passage of eleven (11) years from the

offer of compromise to the filing of the

complaint is in the opinion of this

Court, a sufficient prima facie case. It

takes little imagination to believe

Defendants may have be prejudiced by such

a celay.

The record is insufficient, however,

to dismiss the claim because of the

delay. Therefore, the matter is set for

s 69 «

an evidentiary hearing on the 13th day of

June, 1980, at 3:30 P.M. In light of the

fact that the delay appears to have been

caused by the government, that the

reasons for the delay are better known to

the rovernment than to the Defendants,

and the record already established a

prima facie case in favor of Defendants,

it is the Court's present opinion that

the burden should rest with the govern-

ment to show that the delay was reason-

able. Once that was established, Defen-

Gants would have the burden as to prej-

udice. Counsel may submit any motions,

briefs or other material they wish the

Court to consider by June 6, 1980,

For the above reasons, Defendants'

Motion for Summary Judgement is also

denied, but without prejudice and may be

raised again following the above

= 53 «

scheduled hearing.

IT IS SO ORDERED.

Dated: 5/12/80 /s/ STEWART A. NEWBLATT

United States District

Judge

« =

APPENDIX E

United States District Court for the

Eastern District of Michigan, Southern

Division, Flint

Criminal Action No: 44984

UNITED STATES OF AMERICA, Plaintiff,

Vv.

LAWRENCE M. and ROENA J. HOLLOWAY,

Defendants.

Tne defendants in this case are

chargead in the indictment with violation

of Section 7206(1), Title 26, United

States Code, in two counts. In the first

count the two defendants are charged with

having submitted a false Offer in Compro-

mise to nav back income taxes; in the

seconcd count the defendant Lawrence M.

Holloway is charged with having submitted

a false statement of Financial Condition

and Other Information.

Defencants have moved to dismiss the

- 55 -

indictment. We consider the motion

against the chronological history of the

defendants' income tax involvement with

the government.

The defendant Lawrence M. Holloway

was indicted by the government in 1961

for income tax evasion. He pleaded

puilty and was placed on two years pro-

bation and fined $10,000.00. Thereafter,

civil proceedings were instituted by the

government to collect back taxes anda

interest. These latter proceedings

culminated in a decision of liability for

more than one hundred twenty-five thou-

sand dollars. Holloway was at that time

geevly involved in the affairs of the

Owosso Finance Company, which went under

and was sold at a great loss in 1964.

For many years Holloway's attorney was

Mr. Francis George of Flint, Michigan.

- 56 -

During Holloway's struggles to save his

finance comnanyv, he fired a manager for

mismanagement and replaced him with Mr.

Rolandc A. Bourdon. Beginning some time

in 1965 the taxpayer and the government

attempted to work out some Kind of

settlement on the tax liability, as it

was obvious to both that he was in fact

unable to pay the full assessment. In

June 1965, the currently involved Offer

in Compromise and Statement of Financial

Condition and Information were filed, the

defendants offering to pay ten thousand

dollars in settlement. It was upon these

documents that this prosecution was

instituted.

The vital issue with respect to both

documents is whether there was in fact

falsification by the defendants of their

financial condition and the defendant

- 57 -

Lawrence Holloway's physical condition;

the government charging that, whereas

Lawrence Holloway claimed the ownership

of assets having a fair market value of

$4,400.00, he in fact had, and knew he

had, additional assets having a fair mar-

ket value of $24,426.30.

From Lawrence Hollaway's affidavit

it is clear that he claims that some

$23,000.00 of “— difference between his

and the government views concerning the

extent of his assets could have been

explained by his long-time attorney, Mr.

George, and by the finance company

manager, Mr. Roland A. Bourdon; and that,

were their testimony now available to

him, he could establish that the alleged

and disputed assets were not his but

belonged to his wife, his children and to

Mr. George (as an attorney fee); and that

- 58 -

if Dr. Elbert Dean Elsea, now deceased,

were available as a witness, he would

Support his contention that his health

was diarnosed by the doctor as rendering

it unwise for him to continue in the

practice of medicine.

It should be noted that Dr. Elbert

Dean Flsea died September 7 1967, Roland

A. Bourdon died June 10, 1968; and

Francis George died meres 22. I97TO,

The documents were filed June 4,

1965, The government then investigated

the Offer for a time and on March 26,

1968 the defendants were informed that

the fovernment was considerinc bringing

criminal charges based upon the Offer.

Later the case was referred to the

Denartment of Justice, and on May 20,

1970, the present indictment was

returnea.

-~ 59 -

The defendants say that the delay

was unconscionable and that they have

been irreparably prejudiced in the pre-

sentation of a defense, and that accord-

ingly the indictment should be dismissed.

Generally, the Court of Appeals for

the Sixth Circuit has held (see, Hoopen-

garner v. U.S., 270 F.2d 465, and cases

in the Sixth Circuit following it) that

the right to a speedy trial under the

Fifth Amendment to the United States

Constitution applies only after formal

charges are lodged, and that the statute

of limitations governs thereafter. We

are satisfied, however, that pre-indict-

ment delay, under the circumstances of

this case, where there is a_e serious

impairment of the accused's ability to

present a defense, raises a constitu-

tional issue under the Amendment. Our

a 60

Own court has sustained a motion to

dismiss under like circumstances. See

U.S. v. Haulman, 288 F. Supp. 775 (1968).

We are persuaded that that case was

properly decided and that the grounds in

Support of the motion in this case are

perhaps stronger, in terms of prejudice

to the presentation of a defense, than in

Haulman.

The motion to dismiss the indictment

is granted.

IT IS SO ORDERED.

December 16, 1971. /s/ STEPHEN J. ROTH

United States

District Judgre

- §1 «

APPENDIX F

United States District Court for the

Eastern District of Michigan, Southern

Division

Civil Action No: 76-40149

UNITED STATES OF AMERICA, Plaintiff,

Ve

LAWRENCE M. and ROENA J. HOLLOWAY,

Defendants.

JUDGMEN

This action came on for hearing

before the Court, Honorable Stewart A.

Newblatt, District Judge, presiding, and

the issues having been duly heard and a

decision having been duly rendered,

IT IS ORDERED AND ADJUDGED that

judgment be exvered for the plaintiff,

United States of America, and this action

is hereby dismissed.

Dated: January 1l, 1985

ROBERT A. MOSSING, CLERK

By: /s/ Ruth A. Jozwiak,

Deputy Clerk

« 63 «

ar |

O

Robert W. Haviland

AUSA

600 Church Street

Flint, MI 48502

Robert J. Solner

6735 Telegraph Road

Suite 100

Birmingham, MI 4808

APPENDIX G

Unites States Court of Appeals for the

Sixth Circuit

NO. 85-1128

UNITED STATES OF AMERICA, Plaintiff/

Appellee,

Ve

LAWRENCE M. and ROENA J. HOLLOWAY,

Defendants/Appellants.

ORDER

[Filed September 15, 1986]

BEFORE: LIVELY, Chief Judge; KENNEDY and

MILBURN, Circuit Judges.

Upon receipt and consideration of

the petition for rehearing filed herein

by the defendants-anpellants, the court

concludes that it did not overlook or

misverceive any of the issues raised in

this appeal. Accordingly, the petition

for rehearing is cenied.

ENTERED BY ORDER OF THE COURT

/s/ Jonn P. Hehman, Clerk/AS

- 64 -

APPENDIX H

366 7-86 Special Procedure 7507

Exhibit 5700-10

Form 656 Checklist

(Reference: IRM 57(10)2.1)

CHECKLIST FOR FoRM 656

Is the taxpayer's full name, address,

Social Security Number, and/or

Emplover's identification Number com-

plete? 57(10)2,22

Is the offer dated in the Space pro-

vided? 57(10)2,22

Is the liability being compromised

accurately and completely describea

(not abbreviated) including the

period of tax involvead? 57(10)2.24

2. income tax, plus Statutory addi-

tions, for the calendar year

1982,

4.

b. Withholding and Federal Insurance

Contributions Act taxes, plus

statutory additions, for the

quarters ending °

c. (Tyve of excise tax) plus statu-

tory additions, for the period

ending °

d. A 100 percent penalty assessment,

plus statutory additions incurred

as a responsible officer or

employee of the XYZ Corporation

for failure to pay withholding

and Federal Insurance Contribu-

tion Act taxes* for the quarterly

periods ending 12/31/xx,

etc.

Is the amount offered entered in the

space provided? 57(10)2.25

a. If the total offered is paid at

the time the offer is filed, no

= 66 a

other entry is required.

b. If the offer is a deferred pay-

ment offer is the following

information included in the terms

of payment?

1. the amount deposited with the

offer

2. the amount of each deferred

payment

3. the date on which each pay-

ment is to be made.

Is the reason for submitting the

offer stated in item 7 of Form 656?

57(10)2.27 (There are only two, doubt

as to liability, and doubt as to

collectibility.)

Is Form 433 attached for offers based

on doubt as to collectibility?

Is the offer signed by taxpayer

(Individual)? 57(10)2.28(1)

- 67 -

10.

Lika

If a joint liability, is the offer

signed by all parties to the assess-

ment? (If not, must secure a

co-obligator agreement) 57(10)5.3

If taxpayer is a corporation, is it

signed in the corporation name by the

president or other autnorized

officer? 57(10)2.28(1)

Has the waiver section on the offer

been executed by a delegated Internal

Revenue employee and the date in-

serted? 57(10)4

'4

ry

se)

J

4?)

w

oO

Oo

—

Ww

ible officer of a corpor-

corporation and also is filing it in

lieu of having the 100% penalty

assessed against him/her, is the

offer signed on behalf of the corvor-

' > i 7 : Sear2 A | We +)

yell as individually by the resvon-

2

Sidi€

officer.

57(10)9.741

MT 5700-5

Revenue Manual - Administration

APPENDIX I

246 2-86 Special Procedures tie ee

Exnibit 5700-36

Pattern Letter P-238

(Reference: IRM 57(10)(13).4:(2)(a))

PEJECTION LETTER-OFFER TO COMPROMISE TAX

AND 100 PERCENT PENALTY LIABILITIES

(Use appropriate letterhead)

[Salutation]

This refers to your offer of

${amount], submitted to compromise [kind

of liability] for the tax period(s)

vear(s) or period(s) ending.

We are sorry, but your offer is

.

reiected because the tax is held to be

lefsally due and an amount larger than the

offer apnpvears to be collectible. Wwe do

not have authority to accept an offer in

these circumstances.

We must therefore ask you to pay

ee en

your account in full as soon as possible.

If you have any questions, please contact

[name], Internal Revenue Service,

(address, telephone number].

Sincerelv, yours,

Sienature and title

[When apprcpriate, substitute one of the

following for the second paragraph: ]

Sov

OD

a)

ry

4)

sorry, but your offer is

rejected because you have not fur-

nished sufficient information to

en2ble us to determine its adequacy.

. We are sorry, but your offer is

rejected. Our action is based on

what we consider to be the _ best

interests of the Government.

3. Employment tax cases only. We are

sorrv, but your offer is rejected as

insufficient since it is not our

eS oe

—1

Y)

-4

t

—

policy to give favorable considera-

tion to an offer to compromise

employment taxes unless’ the amount

offered is equal to the unpaid tax

(exclusive of penalty and interest)

and the taxpayer's financial condi-

tion indicates no greater amount is

collectible. [This reason for rejec-

tion is applicable only when taxpayer

submitting ne offer is still in the

same business, i.e., the same legal

entity, as when the liability sought

to be comvromised was incurred. ]

MT 5700-1

rnal Revenue Manual —- Administration

APPENDIX J

75324 Part V - Collection 346

2-86

Activity

Exhibit 5700-37

Pattern Letter P-679

(Reference: IRM 57(10)(13).42)

REJECTION LETTER-Pro Forma Rejection of

Offer when the Taxpayer Dies During Con-

Sideration.

(Use appropriate letterheza)

[Salutation](See land 2 below)

This refers to the offer submitting

to compromise the [kind of liability] of

[name of taxpayer(s)] for [year(s) or

periods ending].

We are sorry, but we must reject

this offer. It would not be legally

acceptable as submitted because [name of

deceased taxpayer] is now deceased.

In order for an offer on behalf of

- 73 -

this taxpayer to be considered a new Form

656 must be filed showing [name] as

deceased. ’

If you have any questions, please

contact [name], Internal Revenue Service,

at address and telephone number.

Sincerely yours,

[Signature and title]

1. [To The Estate of if a single tax-

paver. |]

2. [To the surviving spouse if a joint

liability. |

MT 5700-1

Commerce Clearing House, Inc.

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