Arthur A. Lemann III and Roberta A. Lemann - Page 5

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          of $201,191.  Petitioners checked the "Doubt as to                          
          Collectibility" box as the basis on which they believed they were           
          entitled to be considered for an offer-in-compromise.                       
               The Appeals officer forwarded the offer-in-compromise to an            
          offer specialist for review.  By letter dated May 7, 2002, the              
          offer specialist informed petitioners that an acceptable offer              
          amount would consist of both equity in assets and some portion of           
          "future income" available to pay taxes; i.e., gross income less             
          necessary living expenses.  The offer specialist further advised            
          that her preliminary calculations showed a reasonable collection            
          potential significantly higher than the offer petitioners had               
          made.  The offer specialist's administrative file notes of the              
          same day indicate that she had preliminarily computed                       
          petitioners' future income as $2,713 per month for 48 months, or            
               The offer specialist's notes record that on May 3, 2002, she           
          discussed with Mr. Lemann the monthly credit card expense of                
          $1,600 reported by him on the revised Form 433-A, and advised him           
          that this expense was not allowable in computing future income.             
          On May 7, 2002, the offer specialist sent Mr. Lemann her                    
          preliminary income and expense computations in which she noted              
          that, for purposes of evaluating petitioners' offer-in-                     

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