Judith A. Madden - Page 8

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         questionnaire was being sent to Mr. Sturges.  Petitioner and Mr.             
         Sturges completed their respective questionnaires and returned               
         them to respondent.                                                          
              On November 18, 2002, petitioner and Mr. Sturges filed                  
         another offer-in-compromise offering to compromise their 2000 tax            
         liability for $1,000.  That offer was rejected on January 15,                
         2003.                                                                        
              On February 19, 2003, respondent issued petitioner a                    
         preliminary determination letter informing her that respondent               
         was denying her relief from liability because she had not                    
         established (1) that she believed at the time she signed the                 
         joint return that the taxes would be paid or (2) that she would              
         suffer economic hardship.  Petitioner appealed that determination            
         to the IRS Appeals Office.                                                   
              In April 2003, petitioner and Mr. Sturges borrowed an                   
         additional $150,000 that was secured by a second mortgage on the             
         residence.  They used the borrowed funds to pay the debt on their            
         credit cards and their daughter’s college tuition.                           
              The Appeals Officer assigned to petitioner’s request sent               
         petitioner an initial contact letter on July 11, 2003.  The                  
         Appeals Officer sent a notice to Mr. Sturges on August 1, 2003.              
         The Appeals Officer corresponded with petitioner and her                     
         representative over the next several months.  In June 2004, the              







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