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indebtedness of $60,000. The resulting $40,000 figure was less
than the $67,000 of equity in the residence reported by
petitioners. Similarly, the offer specialist accepted
petitioners' estimate of their equity in their automobiles
($2,000) and reduced it to quick sale value ($1,600), resulting
in total net realizable equity of $41,600. In accepting the
offer specialist's recommendations, the Appeals officer made a
further concession to petitioners by disregarding the equity in
their automobiles to conclude that their net realizable equity
equaled $40,000.
The offer specialist likewise followed published guidelines
in computing petitioners' future income. Following standard
procedure, she increased the monthly income petitioners reported
on their Form 433-A by $612 to conform with their 2001 Forms W-2
and dividend income reported on their 2001 Federal income tax
return. See IRM, sec. 5.8.5.2.1 (Nov. 2001). She made
adjustments to the expenses claimed by petitioners on the Form
433-A in accordance with the applicable procedures contained in
the IRM.12 Those procedures allow taxpayers the lesser of the
12 The IRM sets forth procedures for evaluating both
proposed installment agreements and offers-in-compromise. See
IRM, secs. 5.15.1-5.15.1.4 (Mar. 2000). Those procedures contain
guidelines for allowable necessary and conditional expenses.
Necessary expenses are those that provide for the health and
welfare of the taxpayer and his or her family, and for the
production of income. These expenses must be reasonable in
amount, and are generally based on national or local standards.
Necessary expenses include such things as: (1) Food, housekeeping
supplies, clothing, personal care expenses and services (based on
(continued...)
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