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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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