Arthur A. Lemann III and Roberta A. Lemann - Page 18

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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. (Nov. 2000),            
 (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. (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. (Nov.           
          2000), and offsetting that figure by their claimed mortgage                 

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