Question

This question involves how the IRS evaluates collection potential when it receives an offer in compromise based upon doubt as to collectability. Consider this statement: When evaluating the collection potential of a taxpayer, the IRS uses the quick sale value of the taxpayer's assets. Question: which of the following most accurately describes the above statement?

The statement is true. The statement is false.

The statement is false because as a rational creditor, the IRS instructs its Revenue Officers to use a value that will maximize collection potential.

There are not enough facts to determine if the sentence is true or false. T

he statement is false because the IRS generally uses a blended fair market and cost valuation methodology.

Answer 1

Answer-

The statement is True. When evaluating the collection potential of a taxpayer the IRS allows the use of quick sale value (QSV).

Depending on the need to value the asset as part of the taxpayer’s readily available resources, the reasonable collection potential (RCP) provides for the use of the quick sale value (QSV) of an asset.

The other options are incorrect. The IRS does not look to maximize collection potential.

The IRS uses quick sale value not the blended fair market and cost valuation methodology.