Ronald J. and June M. Speltz - Page 4

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               Petitioners partially paid the liability reported on their             
          2000 Form 1040 at the time that it was filed and paid an                    
          additional $75,000 in installments prior to November 2, 2001.               
          Petitioners borrowed $134,000 from a bank to pay State and                  
          Federal taxes reported on their 2000 returns.                               
               On or about November 2, 2001, petitioners submitted to the             
          Internal Revenue Service (IRS) a Form 656, Offer in Compromise.             
          Petitioners offered a cash payment of $4,457, the cash value of             
          petitioner’s life insurance policy, against the liability that              
          then exceeded $125,000.  On the Form 656, petitioners checked the           
          box for “Doubt as to Collectibility--‘I have insufficient assets            
          and income to pay the full amount.’”  Petitioners also attached             
          to Form 656 a statement in which they explained that an offer in            
          compromise was necessary because of the impact the AMT in 2000              
          had on their finances and their lifestyle.  Specifically,                   
          petitioner’s income in 2000 was at a comfortable level for a                
          family of five including three young daughters; the McLeod stock            
          they held was nearly worthless and declining and had been used to           
          secure a $134,000 loan with a bank to pay part of the 2000                  
          Federal and State taxes; and, in the event of a sale of the stock           
          (forced or otherwise), petitioners would be unable to carry back            
          the capital loss to offset their 2000 gain.  They began building            
          a new home in 2000 and sold their prior home in 2001, using the             
          proceeds of sale to repay the bank.  Lifestyle changes were                 






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