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Tax Court holds in 2 cases that acceptance of offer in compromise is a binding settlement and forecloses raising further issues new 2/21/04 updated 8/21/04

1. The Court in Johnson refused to allow taxpayers to reduce their qualified offer to settle1989, 1991, and 1992 tax years before the Tax Court by net operating losses (NOLs) sustained in the 1988, 1990, 1993, finding the offer settled all issues.

2. The Court in Dutton found no mutual mistake of fact allowing revocation of the offer. The IRS sent a letter erroneously indicating taxpayer would receive a refund in connection with granting taxpayer's request for innocent spouse relief for 1986 and 1987 (refunds are not allowed), followed by IRS denial of the request for innocent spouse relief after acceptance of an offer in compromise for 1986, 1987 and 1993 through 1999. The erroneous letter was sent after taxpayer submitted an offer, and the error was corrected in subsequent communications with taxpayer's representative before the offer was accepted.

Dutton v Comm., 122 T.C. 7, 2004 WL 244382 (February 11, 2004)

Taxpayer petitioned the Tax Court for review of IRS's denial of his request for innocent spouse relief from joint and several tax liability after IRS had accepted his offer in compromise.

Taxpayer petitioned the Tax Court and argued the IRS manager's statement that taxpayer would be entitled to a refund resulted in a mutual mistake of material fact or misrepresentation sufficient for the offer to be set aside.

The Court noted taxpayer claimed reliance on the mistaken suggestion in the May 7, 2001, letter, received approximately 2 weeks after he submitted the offer, indicating that he might receive a refund. There was no indication at the time the offer was submitted that taxpayer was under the impression that the IRS would issue a refund based on relief granted under section 6015(b), (c), or (f) if the offer was approved.

The Court found that on the basis of taxpayer's own argument:

The Court further noted that:

In his answering brief taxpayer argued for the first time that the doctrine of equitable estoppel applies. Tax Court practice is not to consider new issues raised for the first time in an answering brief, and the Court did not consider that argument.