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disposable income of $4,746. She calculated that petitioners
could pay $227,808 from their future income.7 In sum, Cochran
concluded, petitioners’ net realizable equity in assets and
future income equaled $932,844.
On July 22, 2005, Appeals issued petitioners a notice of
determination sustaining the proposed levy. The notice concludes
that petitioners’ $83,213 offer-in-compromise is not an
appropriate collection alternative to the proposed levy. The
notice, citing Internal Revenue Manual (IRM) sections 5.8.11.2.1
and 5.8.11.2.2, states that petitioners’ offer does not meet the
Commissioner’s guidelines for consideration as an offer-in-
compromise to promote effective tax administration on the basis
of economic hardship or equity and public policy. Cochran noted
that since petitioners had not specified the basis on which they
were making their offer, she considered it under both economic
hardship and equity and public policy grounds.
As to petitioners’ offer-in-compromise to promote effective
tax administration due to economic hardship, the notice states:
Considered under economic hardship, the taxpayers have
the ability to pay all amounts owed from either their
assets or their income stream and still have assets and
an income stream remaining worth over $630,000. The
amount being offered by the taxpayers represents 8% of
the taxpayers’ Reasonable Collection Potential (RCP).
7 Cochran arrived at $227,808 by multiplying petitioners’
monthly disposable income of $4,746 by a factor of 48.
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