Fowler v. Commissioner

T.C. Memo. 2004-163 (2004)

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Fowler v. Commissioner

United States Tax Court
T.C. Memo. 2004-163 (2004)

Facts

The Internal Revenue Service (IRS) assessed taxes, penalties, and interest against Orange County, California, residents Mark Fowler and Joylyn Souter-Fowler (the Fowlers) (plaintiffs). In June 2000, the IRS filed tax liens against the Fowlers with the Orange County recorder. In July, the Fowlers participated in a collections-due-process hearing regarding the IRS liens and their attempt to settle their IRS debts via an offer in compromise. As part of that hearing, the Fowlers made an offer-in-compromise of $2,400, which the Fowlers proposed to pay in 24 monthly installments of $100. The Fowlers also told an IRS appeals officer that they owned a car that could quickly be sold for $2,4000 and that they had a monthly gross income of $4,608 and monthly expenses of $3,989, leaving $619 per month available to pay the IRS. The appeals officer accepted the Fowlers’ gross-income and car-valuation figures but rejected their expense estimate as unrealistic. The appeals officer did not specifically explain why he believed that the Fowlers’ expense submission was unrealistic. Instead, relying on national statistical averages compiled by the IRS, the appeals officer estimated that the Fowlers’ monthly expenses were $4,644, leaving them no money to pay $100 per month to the IRS. Accordingly, the IRS rejected the Fowlers’ offer in compromise and upheld the liens against the Fowlers. The Fowlers sued the commissioner (defendant) of the IRS in the United States Tax Court, arguing that the IRS abused its discretion by substituting national statistics for the Fowlers’ monthly-expense estimate and upholding the liens against them.

Rule of Law

Issue

Holding and Reasoning (Gerber, C. J.)

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