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for the production of income and/or for the health and welfare of
the taxpayer and his family. Id. The sum of the necessary
expenses establishes the minimum amount the taxpayer needs to
live. Id.
A taxpayer’s reasonable collection potential is determined,
in part, using published guidelines for certain national and
local allowances for basic living expenses. Income and assets in
excess of those needed for basic living expenses are considered
available to satisfy Federal income tax liabilities. This strict
formulaic approach is disregarded, however, on a showing by the
taxpayer of special circumstances including, but not limited to,
advanced age, poor health, history of unemployment, disability,
dependents with special needs, or medical catastrophe, that may
cause an offer to be accepted notwithstanding that it is for less
than the taxpayer’s reasonable collection potential. Lemann v.
Commissioner, T.C. Memo. 2006-37.
Petitioner asserted generally that the published expense
schedules do not adequately reflect the cost of living in greater
Los Angeles. The Court does not doubt that living in southern
California is expensive. However, the scheme of national and
local expense standards employed by the Commissioner reasonably
attempts to consider regional and local costs. Local standards,
for example, cover two necessary expenses: Housing and
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Last modified: March 27, 2008