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It is not totally clear how dissipated assets can be “no longer
available to pay the tax liability” (see (1), above) while at the
same time included in the “reasonable collection potential (RCP)
calculation” (see (5), above).
The settlement officer apparently considered herself
required to apply this rather cryptic guideline, and under an
abuse of discretion standard we are not at liberty to challenge
her judgment that it should be used. However, under the abuse of
discretion standard, we must assure that the guideline is
correctly applied.
The Appeals Case Determination states that
Appeals preliminary determination of Dr. Samuel’s net
realizable equity (NRE) in his assets is that it should
include 100% of his dissipated assets totaling $133,158 with
the possible exception of the $15,600 paid for his 2003
estimated tax payment, his legal fees of $5,000 incurred in
association with his civil law suit against his prior
employer and $5,464 paid for child support. He has no net
realizable equity in his personal residence given that quick
sale value (QSV) is used and offset against his mortgage of
$322,000. Since his mortgage exceeds the QSV of $320,000
(80% of FMV determined to be at $400,000), he has no equity
to include in his NRE. Appeals believes that his interest
in his medical corporation exceeds that which was reported
at the face-to-face hearing to be the value of the equipment
totaling $3,630. This is an on-going business that had
gross income in excess of $300,000 in 2003.
The Appeals Case Determination goes on to state that
Dr. Samuel was provided the opportunity to increase his
offered amount to at least include amounts he realized
pursuant to his dissipated assets in order that his offer
receive further consideration. He declined to so do.
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Last modified: November 10, 2007