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and essentially treating income and assets in excess of those
needed for basic living expenses as available to satisfy Federal
income tax liabilities. The foregoing formulaic approach is
disregarded, however, upon a showing by the taxpayer of special
circumstances including, but not limited to, advanced age, poor
health, history of unemployment, disability, dependents with
special needs, or medical catastrophe, that may cause an offer to
be accepted notwithstanding that it is for less than the
taxpayer's reasonable collection potential. Sec. 301.7122-
1(c)(3), Proced. & Admin. Regs.; IRM, secs. 5.8.5.4 (Nov. 2000),
5.8.11.2.1 (Nov. 2001).
A taxpayer's reasonable collection potential is calculated
by determining, then adding together: (1) The taxpayer's "net
realizable equity"; i.e., quick sale value less amounts owed to
secured lien holders with priority over Federal tax liens; and
(2) his "future income"; i.e., the amount collectible from the
taxpayer's expected future gross income after allowing for
necessary living expenses. IRM, sec. 5.8.5.4 (Nov. 2000).
Here, the offer specialist followed published guidelines in
computing petitioners' net realizable equity. The net realizable
equity from their residence was computed by accepting
petitioners' estimate of value ($125,000), reducing it to a quick
sale value of $100,000 as prescribed by IRM, sec. 5.8.5.3.1 (Nov.
2000), and offsetting that figure by their claimed mortgage
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