Arthur A. Lemann III and Roberta A. Lemann - Page 9

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          $207,567 exceeded petitioners' outstanding tax liabilities, the             
          offer specialist recommended that petitioners' offer-in-                    
          compromise of $67,000 be rejected.                                          
               The Appeals officer accepted the offer specialist's                    
          recommendations.  On June 10, 2002, the Appeals officer sent                
          petitioners a letter explaining that their $67,000 offer-in-                
          compromise would not be accepted because review indicated the               
          entire outstanding balance of their tax liabilities could be                
          collected over time.  The letter explained that, in such                    
          circumstances, an installment agreement was the available                   
          collection alternative.                                                     
               Based on the offer specialist's calculations, the Appeals              
          officer proposed that petitioners make an initial lump-sum                  
          payment of $40,000,6 and monthly payments of $2,8207 commencing             
          July 26, 2002.  The letter further advised petitioners that,                
          because their case had been under consideration since 2000, and             
          an installment agreement had been determined to be the available            
          alternative to a levy, their failure to accept the terms of the             

               6 The Appeals officer's case memorandum indicates that he              
          disregarded the $1,600 equity in petitioners' automobiles                   
          postulated by the offer specialist, concluding that their net               
          realizable equity consisted only of the $40,000 equity in their             
          residence as found by the offer specialist.                                 
               7 The offer specialist had computed petitioners' monthly               
          future income as $2,813.  While the record does not disclose the            
          basis on which the Appeals officer increased this figure to                 
          $2,820 for purposes of the installment agreement he proposed, we            
          conclude that the difference is immaterial.                                 

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