Arthur A. Lemann III and Roberta A. Lemann - Page 19

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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. (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- (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           

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