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309, 320 n.10 (2005), affd. 469 F.3d 27 (1st Cir. 2006); Barnes
v. Commissioner, T.C. Memo. 2006-150.
A. Economic Hardship
Petitioners assert that Ms. Cochran abused her discretion by
rejecting their offer-in-compromise because “There is no
indication that SO Cochran gave any substantive consideration to
Petitioners’ demonstrated special circumstances or that they
would experience a hardship if required to make a full-payment.”
In support of this assertion, petitioners argue: (1) Ms. Cochran
failed to discuss petitioners’ special circumstances in the
notice of determination; and (2) Ms. Cochran erroneously
determined petitioners’ reasonable collection potential and
failed to take into account their future expenses.
Section 301.6343-1(b)(4)(i), Proced. & Admin. Regs., states
that economic hardship occurs when a taxpayer is “unable to pay
his or her reasonable basic living expenses.” Section 301.7122-
1(c)(3), Proced. & Admin. Regs., sets forth factors to consider
in evaluating whether collection of a tax liability would cause
economic hardship, as well as some examples. One of the examples
involves a taxpayer who provides full-time care to a dependent
child with a serious long-term illness. A second example
involves a taxpayer who would lack adequate means to pay his
basic living expenses were his only asset to be liquidated. A
third example involves a disabled taxpayer who has a fixed income
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