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48 months was approximately $24,000 ($501 x 48 = $24,048),8 and
that petitioners’ reasonable collection potential was $163,617
(future income potential of $24,000 + net realizable equity of
$139,617). As an alternate calculation, Cochran took into
account petitioners’ $500 other expense (so as to eliminate any
consideration of future income potential) and recomputed their
reasonable collection potential at their net realizable equity of
$139,617.9 Cochran performed the alternate calculation because
she believed that the “other expense” could represent an
otherwise allowable expense such as attorney’s fees, although not
reported as such.
On May 12, 2005, Appeals issued petitioners the notice of
determination sustaining the proposed levy. The notice concludes
that petitioners’ $32,000 offer-in-compromise is not an
appropriate collection alternative to the proposed levy. The
notice, quoting in part Internal Revenue Manual (IRM) section
5.8.11.2.2.3, states that petitioners’ offer does not meet the
Commissioner’s guidelines for consideration of an offer-in-
compromise due to doubt as to collectibility with special
circumstances. The notice, citing IRM sections 5.8.11.1.2 and
8 Cochran used a 48-month factor because petitioners were
offering to compromise their tax liability by paying cash. See
Internal Revenue Manual (IRM) sec. 5.8.5.5.
9 Cochran noted that the alternate calculations would be
$131,617 and $107,617 were she to take into account the $32,000
proposed offer.
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