B-125711, OCT. 26, 1955

B-125711: Oct 26, 1955

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MARSHALL: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 29. WHICH APPARENTLY WAS SETTLED BY THE COMMISSIONER OF INTERNAL REVENUE FOR $10. YOU STATE THAT SUCH SETTLEMENTS ARE UNFAIR TO OTHER TAXPAYERS WHO ARE REQUIRED TO PAY THE FULL AMOUNT OF THEIR TAXES AND YOU ASK WHAT WE CAN DO TO STOP THIS UNFAIR PRACTICE. WE ARE UNABLE FROM THE FACTS STATED IN YOUR LETTER TO DRAW ANY CONCLUSION CONCERNING THE FAIRNESS OF THE SETTLEMENT. THE COURTS ALSO HAVE HELD THAT OPPORTUNITIES TO SETTLE THE COMPROMISE DISPUTES AS TO THE EXISTENCE OF TAX LIABILITIES ARE AVAILABLE TO ALL TAXPAYERS.

B-125711, OCT. 26, 1955

TO MR. R. W. MARSHALL:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 29, 1955, CONCERNING A FEDERAL INCOME TAX CLAIM OF $36,146, INCLUDING INTEREST AND PENALTIES, WHICH APPARENTLY WAS SETTLED BY THE COMMISSIONER OF INTERNAL REVENUE FOR $10,400. YOU STATE THAT SUCH SETTLEMENTS ARE UNFAIR TO OTHER TAXPAYERS WHO ARE REQUIRED TO PAY THE FULL AMOUNT OF THEIR TAXES AND YOU ASK WHAT WE CAN DO TO STOP THIS UNFAIR PRACTICE.

WE ARE UNABLE FROM THE FACTS STATED IN YOUR LETTER TO DRAW ANY CONCLUSION CONCERNING THE FAIRNESS OF THE SETTLEMENT, SINCE IN MAKING ANY SUCH SETTLEMENT THERE MUST NECESSARILY BE CONSIDERED MANY FACTORS, INCLUDING THE QUESTION AS TO WHETHER A DEFINITE TAX LIABILITY ACTUALLY EXISTS. CONSIDERING THE FAIRNESS OF A COMPROMISE SETTLEMENT THE COURT IN THE CASE IN RE NIAGARA FALLS MILLING COMPANY, 37 F.SUPP. 47, HELD THAT THE MANY INTRICACIES INVOLVED IN ESTABLISHING A LEGAL CLAIM FOR A REFUND OF A PROCESSING TAX WARRANTED, IN THAT CASE, THE APPROVAL OF THE COMPROMISE SETTLEMENT CONSIDERED THEREIN. THE COURTS ALSO HAVE HELD THAT OPPORTUNITIES TO SETTLE THE COMPROMISE DISPUTES AS TO THE EXISTENCE OF TAX LIABILITIES ARE AVAILABLE TO ALL TAXPAYERS. SEE HEITSCH V. KAVANAGH, 200 F.2D 178.

IN VIEW THEREOF AND SINCE SECTION 7122 OF THE INTERNAL REVENUE CODE OF 1954 AUTHORIZES THE SECRETARY OF THE TREASURY OR HIS DELEGATE, OR THE ATTORNEY GENERAL OR HIS DELEGATE IN CASES REFERRED TO THE DEPARTMENT OF JUSTICE FOR PROSECUTION OR DEFENSE, TO COMPROMISE ANY DEPARTMENT OF JUSTICE FOR PROSECUTION OR DEFENSE, TO COMPROMISE ANY CIVIL OR CRIMINAL CASE ARISING UNDER THE INTERNAL REVENUE LAWS, THERE APPEARS NOTHING THAT WE CAN DO IN THIS MATTER.