Donald and Yvonne Clayton - Page 9

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          either $488,985 or $373,985 and that their reasonable collection            
          potential was either $546,417 or $431,417.                                  
               On August 18, 2005, Appeals issued petitioners a notice of             
          determination sustaining the subject levy proposed by respondent            
          to collect petitioners’ Federal income tax liability.  The notice           
          concludes that petitioners’ $100,000 offer-in-compromise is not             
          an appropriate collection alternative to the proposed levy.  The            
          notice, citing IRM sections 5.8.11.2.1 and 5.8.11.2.2, states               
          that petitioners’ offer does not meet the Commissioner’s                    
          guidelines for consideration as an offer-in-compromise to promote           
          effective tax administration on the basis of economic hardship,             
          equity, or public policy.  As to petitioners’ offer-in-compromise           
          to promote effective tax administration due to economic hardship,           
          the notice states:                                                          
               Considered under economic hardship, the taxpayers have                 
               the ability to pay all assessed amounts and still have                 
               assets with equity remaining worth over $285,000.  The                 
               amount being offered by the taxpayers represents 18% of                
               the taxpayers’ Reasonable Collection Potential.  The                   
               taxpayers’ ages and medical conditions were considered                 
               but were insufficient to overlook the taxpayers’                       
               substantial equity in their assets.  The taxpayers have                
               sufficient equity in their assets to pay the tax                       
               amounts owed and still meet their necessary living                     
               expenses for the foreseeable future.  The taxpayers,                   
               therefore, failed to document economic hardship in                     
               accordance with Internal Revenue Manual 5.8.11.2.1.                    











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