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Revenue Manual (CCH), sec. 5.8, at 16,253. Both petitioner and
respondent focus substantial attention in their briefs to the
issue of “Dissipation of Assets”, discussed below.
The IRM provides in part, in “Dissipation of Assets”,
section 5.8.5.4, at 16,339-6, the following:
(1) During an offer investigation it may be
discovered that assets (liquid or non-liquid) have been
sold, gifted, transferred, or spent on non-priority
items and/or debts and are no longer available to pay
the tax liability. This section discusses treatment of
the value of these assets when considering an offer in
compromise.
* * * * * * *
(2) Once it is determined that a specific asset has
been dissipated, the investigation should address
whether the value of the asset, or a portion of the
value, should be included in an acceptable offer
amount.
(3) Inclusion of the value of dissipated assets
must clearly be justified in the case file and
documented on the ICS/AOIC history. * * *
(4) When the taxpayer can show that assets have been
dissipated to provide for necessary living expenses, these
amounts should not be included in the reasonable collection
potential (RCP) calculation.
* * * * * * *
(5) If the investigation clearly reveals that assets
have been dissipated with a disregard of the outstanding tax
liability, consider including the value in the reasonable
collection potential (RCP) calculation. [Emphasis added.]
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