It’s a rough ride for Appeals. Judge Mark V. (“Vittorio Emanuele”) Holmes finds the admin record more than a trifle dicey in Duane Whittaker and Candace Whittaker, T. C. Memo. 2023-59, filed 5/15/23, especially when Caleb B. Smith and the Golden Gophers LITC are on the case.

D and C claim the old homestead is in rough shape, and there’s a HAMP loan with a big balloon, so the local tax assessor’s number is out to lunch, although they can’t show they tried to refinance or otherwise realize upon whatever equity they have. Besides, COVID descended while they were negotiating an OIC with Appeals, and the SO didn’t make much of a record about what happened to D’s and C’s finances in consequence. IRS post-event speculation gets tossed. Most importantly, their retirement account never got into the admin record, and the SO got Duane’s military pension wrong.

Both sides quote the IRM, and Judge Holmes says, while it creates no rights in the taxpayer, “(T)he IRM is important here—it enables the IRS itself to put some bounds on its employees’ exercise of discretion.  But the IRM ‘does not have the force of law and does not confer rights on taxpayers.’ Fargo v. Commissioner, 447 F.3d at 713. Its guidance is usually quite reasonable, however, and we generally uphold a determination to reject an offer if the settlement officer has followed it.” T. C. Memo. 2023-59, at p. 8. And even though the SO’s reasoning wasn’t of the clearest, Judge Holmes could see a path to rejecting the OIC.

Except.

The SO didn’t consider the condition of the house as a special circumstance, which it is.

And the effects of COVID and D’s retirement and C’s two-day-a-week work schedule got such short shrift that all IRS has is speculation (tossed).

Judge Holmes tosses the NOD and remands.

“The Whittakers lost their jobs in the middle of the CDP hearing. Because their current income was important to the RCP calculation, this was a material change of circumstances. On remand the Appeals Office is directed to consider updated financial information that they should provide to document any change in their ability to pay resulting from their loss of income due to the pandemic, as well as other factors in accord with this opinion.” T. C. Memo. 2023-59, at p. 15.