Alan M. and Marcia F. Schulman - Page 10

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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                  

          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           
               6The Internal Revenue Manual provides procedures for                   
          proposed installment agreements.  See 2 Administration, Internal            
          Revenue Manual (CCH), sec. 5.15.1 to, 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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