Brombach v. Commissioner
United States Tax Court
T.C. Memo. 2012-265 (2012)
The Internal Revenue Service (IRS) (defendant) assessed deficiencies against Thomas Brombach (plaintiff) attributable to several taxable years. Brombach negotiated a settlement before the United States Tax Court whereby he agreed to pay $60,000 plus interest. Several years passed in which Brombach failed to pay out the settlement. Brombach’s liability grew to $152,000 because of interest, and the IRS filed a tax lien against all of Brombach’s assets. Brombach sought a collection due-process hearing with an IRS appeals officer. Brombach determined that his own reasonable collection potential was $28,000 and offered to compromise his tax debt for that amount. The appeals officer rejected Brombach’s offer, having calculated Brombach’s reasonable collection potential to be over $113,000. Brombach filed a petition in the Tax Court seeking a ruling that the IRS’s rejection of his offer was an abuse of discretion. The Tax Court held a trial and determined that Brombach had used valuation techniques that substantially undercalculated his reasonable collection potential. The Tax Court also determined that the IRS appeals officer had, in some cases, erroneously overestimated the value of certain items. Ultimately, the Tax Court found that Brombach’s actual reasonable collection potential was about $73,000.
Rule of Law
Holding and Reasoning (Holmes, J.)
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