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taxpayer has a “sporadic employment history or fluctuating
income”, then earnings over several prior years should be
averaged. Id.
As the Appeals officer acknowledged, estimating petitioner’s
future income is “problematical”. Petitioner intends to graduate
and find work, but it is uncertain when he will graduate, what
type of employment he will find, or how much he will earn. While
the IRM addresses situations where the taxpayer is “temporarily”
out of work, petitioner has not been employed for several years.
Petitioner has a history of sporadic employment and thus is a
candidate for income averaging. See IRM sec. 5.8.5.5(5) (Nov.
15, 2004). Because of his limited earnings, however,
petitioner’s average income over the several years prior to 2002
is close to zero.
Despite the unusual circumstances of petitioner’s case, the
IRM provides the following guidance:
In some instances, a future income collateral agreement
may be used in lieu of including the estimated value of
future income in reasonable collection potential (RCP).
When investigating an offer where current or past
income does not provide an ability to accurately
estimate future income, the use of a future income
collateral agreement may provide a better means of
calculating an acceptable offer amount. * * *
Example: A taxpayer is currently in medical school and
it is anticipated that upon graduation income should
increase dramatically.
IRM sec. 5.8.5.5(6) (Nov. 15, 2004).
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