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If... Then...
* * * * * * *
A taxpayer has a sporadic Average earnings over
employment history or several prior years.
fluctuating income Usually this is the prior
3 years.
Note: This practice does
not apply to wage
earners.
A taxpayer is elderly, in Adjust the amount or
poor health, or both and number of payments to the
the ability to continue expected earnings during
working is questionable the appropriate number of
months. Consider special
circumstance situations
when making any
adjustments.
* * * * * * *
(6) Below are some examples on when it is and is not
appropriate to income average. Judgment should be
used in determining the appropriate time to apply
income averaging on a case by case basis. All
circumstances of the taxpayer should be considered
when determining the appropriate application of
income averaging, including special circumstance
and Effective Tax Administration considerations.
a. The examples below are instances when income
averaging may or may not be appropriate.
Example: A taxpayer is a commissioned sales person and
the income varies year to year. It would be
appropriate to income average in this case.
* * *
Even if it were arbitrary for the settlement officer to have
agreed with and accepted the second offer specialist’s calcula-
tion of the “future income” component of petitioner’s RCP by
using petitioner’s average monthly wage income for the three-year
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Last modified: March 27, 2008