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Because petitioners do not dispute the existence or amount of
their underlying tax liabilities, we review the determination for
an abuse of discretion. Lunsford v. Commissioner, 117 T.C. 183,
185 (2001); Nicklaus v. Commissioner, 117 T.C. 117, 120 (2001).
The settlement officer’s consideration of petitioners’
collection alternative, an installment agreement, was reasonable.
Her determination was based on a financial analysis of
petitioners’ monthly income and expenses and their ability to
pay. She allowed certain expenses in amounts greater than those
originally claimed by petitioners, e.g., taxes. And, her
disallowance of claimed expenses was based on applicable
procedures contained in the Internal Revenue Manual.6 The
5(...continued)
raise any issues relating to any offer in compromise, and the
record does not show that they filed a Form 656, Offer in
Compromise. Indeed, at trial, Mr. Schulman indicated his
unwillingness to satisfy the procedures applicable to an offer in
compromise.
6The Internal Revenue Manual provides procedures for
proposed installment agreements. See 2 Administration, Internal
Revenue Manual (CCH), sec. 5.15.1 to 5.15.1.4, at 17,653-17,660.
Those procedures contain guidelines for allowable expenses, which
include necessary and conditional expenses. Necessary expenses
are those that meet the necessary expense test; i.e., “they must
provide for a taxpayer’s and his or her family’s health and
welfare and/or the production of income” and they must be
reasonable. There are three types of necessary expenses: (1)
Those based on national standards, e.g., food, housekeeping
supplies, apparel and services, and personal care products and
services; (2) those based on local standards, e.g., housing,
utilities, and transportation; and (3) other expenses, which are
not based on national or local standards, e.g., health care.
Conditional expenses are those expenses that do not meet the
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