Alan M. and Marcia F. Schulman - Page 5

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               On June 8, 2001, respondent’s settlement officer sent                  
          petitioners the following letter regarding the proposed                     
          installment agreement:                                                      
               I have not received a more viable proposal for payment                 
               of your 1993 thru 1998 (and 1999) Federal Income Taxes.                
               As we discussed during our telephone conference on                     
               5/21/2001, although you do not demonstrate an ability                  
               to pay in full within the near future, an adjustment of                
               your expenses should be made so that within one year                   
               you can commence substantial payments to allow payment                 
               in full of all the liabilities listed on the Notice of                 
               Intent and the 99 and prospective 2000 tax debt.  An                   
               installment agreement in the amount of $75.00 could be                 
               initially allowed which would increase to $748.00 per                  
               month in one year.  I am sorry, but the unsecured and                  
               incidental debt you list in your April 2001 financial                  
               statements * * * [is] not allowable when forbearance                   
               would result in payment in full of all tax liabilities,                
               penalty and interest.                                                  
               The standards for allowable living expenses are                        
               prescribed in the Internal Revenue Manual are the guide                
               used by both the Compliance and Appeals functions.  I                  
               cannot * * * [forgo] these guidelines unless there is a                
               special circumstance such as critical health needs.                    
          In response to this letter, petitioners submitted a Form 433-A,             
          Collection Information Statement for Individuals, dated June 20,            
          2001, in which they stated:  “I would like to reach a compromise            
          between the $75 that was previously agreed to + the $735 [sic]              
          that the IRS has calculated.”  The Monthly Income and Expense               
          Analysis, as part of that form, lists monthly income of $6,965,             
          which consists of Mr. Schulman’s salary of $3,965 and his wife’s            
          salary of $3,000, as well as the following expenses:                        

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