- 9 -
allowances to those items. Ms. Cochran increased the tax expense
to reflect the increased amount of determined income. As
adjusted, the following were the determined monthly items of
expenses:
Total Living Expenses Amount
Food, clothing, and miscellaneous $1,271
Housing and utilities 1,603
Transportation 471
Health care 1,747
Taxes (income) 2,000
Life insurance 28
Other expenses (attorney’s fees) 728
Total 7,848
Ms. Cochran determined that petitioner’s monthly excess
income (i.e., monthly income less monthly expenses) was $3,164
($11,012 - $7,848), his income potential for the next 116 months
was approximately $367,024 ($3,164 x 116 months = $367,024),10
and the reasonable collection potential was $663,914 (income
potential of $367,024 + net realizable equity of $296,890).
On December 16, 2004, respondent issued petitioner a notice
of determination sustaining the proposed levy with the provision
that the collection activity will not include the collection of
interest or penalties until the interest and penalty cases were
10 In the notice, Ms. Cochran mistakenly used a 116-month
factor to determine petitioner’s income potential. On brief,
respondent corrected the mistake by using a 48-month factor as
required when a taxpayer makes a cash offer. As a result,
petitioner’s correct income potential was $151,872 ($3,164 x 48 =
$151,872). See Internal Revenue Manual (IRM) sec. 5.8.5.5.
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