                             T.C. Memo. 2012-265



                        UNITED STATES TAX COURT



                THOMAS W. BROMBACH, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 7924-07L.                        Filed September 12, 2012.



      Thomas W. Brombach, pro se.

      Anne D. Melzer and Jane J. Kim, for respondent.



                          MEMORANDUM OPINION


      HOLMES, Judge: Thomas Brombach owed nearly $152,000 in unpaid taxes

for 1988-92. The Commissioner warned Brombach that he had put a lien on

Brombach’s property. Brombach offered $28,000 to settle the debt--but the
                                          -2-

[*2] Commissioner rejected the offer and declined to lift the lien because he thought

Brombach could pay $113,000 instead. Brombach appeals.

                                      Background

       Brombach is an electric-utility consultant who ran into tax troubles during his

first marriage more than 15 years ago. In 1998, he settled a case in our Court by

agreeing to deficiencies for tax years 1988-92 totaling more than $60,000.

Brombach v. Commissioner, T.C. Dkt. No. 14324-95 (May 27, 1998) (stipulated

decision). The Commissioner then assessed these liabilities plus interest.

       Many years passed without Brombach’s paying, and the Commissioner

decided in 2005 to file a lien against Brombach’s property to secure a debt now

grown to more than $150,000, and sent him the required notice. Brombach

responded by asking for a collection due process (CDP) hearing under section

6320.1 In the request, he challenged the amount of tax the Commissioner said he

owed and asked for reassurance that the lien would not be applied against his wife’s

interest in their joint property.2

       1
        Unless otherwise noted all section references are to the Internal Revenue
Code in effect at all relevant times. Unless otherwise noted all references to the
Internal Revenue Manual (IRM) are to the IRM in effect in March 2007 at the time
the Commissioner rejected Brombach’s offer.
       2
           Brombach also asked the Commissioner to abate interest and penalties for
                                                                       (continued...)
                                          -3-

[*3] His wife then got more involved and gathered the information Brombach

needed to give to the Appeals officer.3 Brombach quickly learned that he could not

contest his liabilities for 1988-92, having already had his chance to do so in Tax

Court. He chose instead to try to compromise the tax debt. With his wife’s help, he

completed a Form 433-A, Collection Information Statement for Wage Earners and

Self-Employed Individuals, and presented the Appeals officer with a packet of

substantiating documents. Brombach’s CDP hearing went smoothly, with both

sides focusing on how much Brombach could pay.

      A few weeks after the hearing, Brombach submitted a completed offer of

$28,000. He included with the offer a letter explaining why his monthly expenses

exceeded the national standards the IRS usually uses. He also listed several

“special circumstances”--medical conditions affecting his future earning potential,

and concerns about a lack of retirement income if he withdrew money from his

401(k). (Brombach was 55 at the time.)

      2
       (...continued)
his 1997 and 1998 tax liabilities. The parties settled this issue before trial.
      3
        In 1999 Brombach had the good fortune of marrying Lynn Calder. She had
taken some accounting courses and had informally helped prepare “easy” tax returns
for about 35 years. Brombach’s new bride helped a great deal in organizing the
records and making good arguments for her husband. Though she is neither a
lawyer nor admitted to practice, we gave her some leeway to help Brombach
present his case.
                                         -4-

[*4] The Appeals officer ultimately rejected the offer, because he concluded that

Brombach could pay more than $113,000. He also wrote that he found “no special

circumstances that would make your offer acceptable.”

      Brombach, a resident of western New York then and now, filed a petition

claiming that the rejection of his offer was an abuse of discretion. We tried the case

in Buffalo.

                                      Discussion

      When someone fails to pay his taxes after the IRS demands he do so, his tax

liability becomes a lien in favor of the United States against all his property. Sec.

6321. Filing a notice of that lien is important because it gives the government’s lien

priority against those of competing creditors who file later. See sec. 6323(a);

Behling v. Commissioner, 118 T.C. 572, 575 (2002). It also opens a short window

of time during which a taxpayer may demand a CDP hearing to check whether the

Commissioner properly filed the lien, and to take a second look at whether that

filing should be sustained. A CDP hearing is also a taxpayer’s chance to offer

collection alternatives.

      During his CDP hearing, Brombach offered to compromise his tax debt as a

collection alternative. The Code permits this, and section 7122 gives the

Commissioner very wide discretion to compromise tax liabilities and to lay down
                                           -5-

[*5] guidelines to “determine whether an offer-in-compromise is adequate and

should be accepted.” Sec. 7122(a), (c)(1).

       The Commissioner has delegated decisions on whether to accept offers-in-

compromise to IRS employees, who are supposed to follow regulations and policies.

The aim is a kind of bureaucratic justice--treating all taxpayers according to

published standards of general applicability but with a bit of discretion to the

individual IRS employee handling a particular case to tinker at the edges if he finds

special circumstances. See sec. 301.7122-1(f)(3), Proced. & Admin. Regs.

       These regulations and policies tell IRS employees to look at different

factors for each of three different kinds of offers. These are offers based on doubt

as to liability, offers based on doubt as to collectibility, and a catchall third

category of offers to promote effective tax administration. Sec. 301.7122-1(b),

Proced. & Admin. Regs. Brombach’s offer was based on doubt as to collectibility.

The IRS analyzes this kind of offer by calculating how much it thinks a taxpayer

can pay or, in IRS jargon, his RCP--reasonable collection potential. Calculating

the RCP is complicated, but the goal is easy to understand--it’s the IRS’s estimate

of what it might get from seizing and selling a taxpayer’s property and garnishing

his income. See Internal Revenue Manual (IRM) pt. 5.8.4.4.1 (Sept. 1, 2005).

After piecing together the necessary calculations, the Commissioner rejected
                                         -6-

[*6] Brombach’s offer because he concluded that it did not come close to the RCP.

The Commissioner also concluded that Brombach failed to show the existence of

special circumstances which might have justified accepting an amount less than the

RCP.

       The first issue in this case is whether the Appeals officer was mistaken in

concluding that Brombach’s RCP was so much more than his offer. Brombach

challenges many of the Appeals officer’s conclusions about the components of the

RCP, his refusal to adjust the RCP for what Brombach calls “special

circumstances,” and the effect that enforcing the federal tax lien might have on
                                         -7-

[*7] Mrs. Brombach.4 He also argues that he should have been given an opportunity

to negotiate or amend his offer before the Appeals officer rejected it.

       Because Brombach isn’t challenging his underlying tax liabilities, we review

the Commissioner’s determination for abuse of discretion. See Sego v.

Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176,

182 (2000). This means that we look to see if the Commissioner’s decision was

grounded on an error of law or rested on a clearly erroneous finding of fact, or



      4
         Brombach repeatedly raised concerns about how a lien would affect his
wife, whom he describes as an “innocent spouse” and an “injured spouse.” He
argues in his brief that the Appeals officer “did not consider his wife’s position”
before issuing a notice of determination. Brombach specifically worried that she
would be left with no retirement income if he depleted his 401(k) account, and that
she would be harmed if the Commissioner put a lien on their jointly owned house.
Neither we nor the Commissioner are unsympathetic to her cause. The Appeals
officer credibly testified that he thought Brombach was concerned that the
Commissioner would confuse Lynn’s name with that of his previous wife, Linda.
The Appeals officer’s notes show that he verified the name of Brombach’s first wife
and verified that the liabilities at issue were Brombach’s individual liabilities, thus
satisfying him that Lynn’s property interests would not be harmed by a lien.

       We also want to assure Brombach that, should he choose to sell (or should
the Commissioner force him to sell) jointly owned property encumbered with a
federal tax lien, his wife would get the proceeds representing her interest regardless
of what went to pay his tax bill, unless she owed back taxes herself. See United
States v. Rodgers, 461 U.S. 677, 690-91 (1983) (“[T]he Government’s lien under §
6321 cannot extend beyond the property interests held by the delinquent taxpayer”).
(We also note that Brombach requested an allocation of his 2005 federal income tax
refund, which would protect his wife’s share from the lien.)
                                         -8-

[*8] whether he ruled irrationally. See Indus. Investors v. Commissioner, T.C.

Memo. 2007-93, 2007 WL 1219686, at *3 (citing United States v. Sherburne, 249

F.3d 1121, 1125-26 (9th Cir. 2001)); see also Cooter & Gell v. Hartmarx Corp.,

496 U.S. 384, 402-03 (1990). Under this standard we do not decide whether in

our own opinion Brombach’s offer-in-compromise should have been accepted, but

whether the Commissioner exercised his “discretion arbitrarily, capriciously, or

without sound basis in fact or law.” Woodral v. Commissioner, 112 T.C. 19, 23

(1999); accord Keller v. Commissioner, T.C. Memo. 2006-166, 2006 WL

2346456, at *4, aff’d, 568 F.3d 710 (9th Cir. 2009) (and aff’g and vacating

decisions in related cases); Fowler v. Commissioner, T.C. Memo. 2004-163, 2004

WL 1559188, at *4.

I.    Calculating Brombach’s RCP

      The Commissioner concedes that the Appeals officer made some mistakes in

calculating the RCP. And the Brombachs admit that they lowballed their offer a bit,

expecting that the Appeals officer would disallow some expenses. The Appeals

officer thought that the lowball was in the dirt: He figured that their offer was more

than $85,000 short.

      With the parties this far apart, our first chore is to decide whether

Brombach’s arguments scratch away enough of the difference to make the Appeals
                                         -9-

[*9] officer’s decision to deny the offer an abuse of discretion. The difference

between the offer and the RCP rests in a few key calculations:

            Item                  Brombach’s value          Appeals officer’s value
 HD Heritage
  motorcycle                            $1,000                       $4,000
 Road King motorcycle                   (2,600)                       3,913
 401(k)                                 28,000                       56,065
 Bank account                       not included                        389
 (Monthly income -                        (358)                        1321
  expenses) x 37                         x 37                       x    37
                                             0                       48,877
  Total offer/RCP                       28,000                     113,244

      A.     Assets

             1.     The Motorcycles

      The first dispute is about how Brombach’s two motorcycles should figure in

calculating his RCP. Brombach told the IRS that he and his wife jointly owned

both of them, and the record shows that the Appeals officer took this joint

ownership into consideration.5 The Appeals officer also used Brombach’s own

valuations to determine the quick-sale value (i.e., 80% of fair market value) of


      5
         Brombach didn’t provide any documentation that Lynn had any interest in
the bikes. But the Appeals officer processed the offer as though the bikes were
jointly owned, and we will do the same.
                                         - 10 -

[*10] each bike. Using quick-sale value is a reasonable way to account for the

possibility that a patient seller would get a higher price than a seller looking to make

a speedy sale. See IRM pt. 5.8.5.3.1 (Sept. 1, 2005). But that’s where the

similarities between the calculations ended: Brombach calculated his interest in

each bike by using a “minimum bid” valuation, less any loan balance, less Lynn’s

share--which he calculated at half the original value (not the “minimum-bid” value)

of each bike less any loan balance. The Appeals officer, on the other hand,

subtracted the loan balance from the quick-sale value, then divided the result in half

to find the value of Brombach’s interest. For the Heritage motorcycle, which had no

outstanding loans on it, the numbers ran like this:

            Item                      Brombach                   Appeals officer
 Fair market value            $10,000                       $10,000
 Quick sale/min. bid          6,000                         8,000
 Lynn’s share                 (10,000 - 10,000/ 2) =        8,000/2 = 4,000
                              5,000
 Brombach’s share             (Min. bid - Lynn’s share)     8,000/2 = 4,000
                              = 1,000

      The Road King was more complicated, because Brombach had financed its

purchase and the parties didn’t agree at first on when we should look at the loan

balance--Brombach said we should take the loan balance at the time of the offer,
                                       - 11 -

[*11] but the Appeals officer reduced the loan amount by expected monthly

payments when he calculated the RCP almost a year after Brombach submitted his

offer.6 Both Brombach and the Commissioner made some concessions in their

briefs, and now agree that the Appeals officer should have used a loan balance of

$5,110.

      For the Road King, the numbers, after concessions, look like this:

           Item                      Brombach                  Appeals officer
 Fair market value           $14,000                     $14,000
 Quick sale/min. bid         8,400                       11,200
 Loan balance                5,110                       5,110
 Lynn’s share                (14,000 - 5,110)/2 =        (11,200 - 5,110)/2 =
                             4,445                       3,045
 Brombach’s share            (Min. bid - loan balance - (11,200 - 5,110)/2 =
                             Lynn’s interest) = (1,155) 3,045




      6
         The Appeals officer recalculated the loan balance in February 2007 based
on a bill the Brombachs submitted with their March 2006 offer. He did not request
updated information from the Brombachs. See, e.g., IRM pt. 5.8.5.2.2(1) (Sept. 1,
2005) (“Collection Information Statements (CIS) submitted with an offer in
compromise should reflect information no older than the prior six months. * * *
However, in certain situations information may become outdated due to significant
processing delays caused by the Service * * * [i]n those cases, it may be appropriate
to rely on the outdated information if there is no indication the taxpayer’s overall
situation has significantly changed.”).
                                        - 12 -

[*12] We don’t find at all reasonable Brombach’s assertion that the value of a

taxpayer’s “half interest” in a jointly owned asset is anything other than one-half of

its realizable value--certainly not when, as here, the taxpayer provides no evidence

justifying a different value for an equal share. See, e.g., IRM pt. 5.15.1.17 (May 1,

2004). Brombach did not provide any documentation to show that his interests in

the motorcycles should be smaller than his wife’s. We also think it is completely

unreasonable for Brombach to have computed a value of -$1,155 for the Road King.

(He also seems to have used this negative value to offset his share of the equity in

the Heritage motorcycle, rendering them together as worth zero in his computation

of his RCP.)

      We therefore find that the Appeals officer did not err in concluding that

Brombach’s interests in the two bikes were worth more than Brombach calculated.7

               2.   The 401(k) Account

      As for the 401(k), the Commissioner conceded that the Appeals officer was

wrong to include the account’s entire $56,065 balance in the RCP, if for no other

reason than that a withdrawal would trigger income and excise taxes. The



      7
        Because we ultimately find that Brombach’s RCP remains higher than his
offer, we do not delve into the problems of the difference between the quick-sale
value and the minimum-bid valuation.
                                       - 13 -

[*13] Commissioner, however, wants us to recalculate the RCP using its after-tax

early-withdrawal value, which would be $33,639. Brombach offered instead to

borrow against it, which would yield $28,000. Without ruling on the

reasonableness of the Commissioner’s approach, we will also assume that the most

the Commissioner could get from Brombach’s 401(k) was $28,000.

            3.     The Bank Account

      The Appeals officer also included in Brombach’s RCP his half interest in a

bank account, worth $389. Brombach doesn’t dispute this addition to his RCP.

      B.    Income

      The motorcycle and bank account issues are small compared to the single

biggest discrepancy between Brombach’s and the Appeals officer’s calculations--

Brombach’s excess monthly income. Brombach’s offer indicated that he actually

spent more each month than he earned (i.e., that excess income was zero), while the

Appeals officer found that Brombach had $1,321 each month in additional income

that could go to pay down his tax debt. They agree that Brombach had $8,671 in

gross monthly income, but they fight over expenses.

      The expense calculations played out like this:
                                       - 14 -

      [*14] Category            Brombach         Appeals officer      Difference

 Food, clothing, etc              $1,390              $1,390               -0-
 Housing/utilities                 1,820               1,557              $263
 Transportation                    1,439               1,172               267
 Health care                         720                 720               -0-
 Taxes                             2,224               1,290               934
 Life insurance                      151                 151               -0-
 Other secured debt                  754                -0-                754
 Other expenses                      531               1,070              (539)
  Total                            9,029               7,350             1,679

      We survey each area of difference.

               1.    Expenses

                     a.   Housing Expenses

      Section 7122(c)(2) requires the Secretary to set up a schedule of “national

and local allowances” to ensure that taxpayers “have an adequate means to provide

for basic living expenses” and to standardize the IRS’s treatment of taxpayers

trying to negotiate a compromise. The Appeals officer disallowed as housing

expenses what the Brombachs incurred on rental property they owned, though the

amount he allowed was still higher than the local housing standards for Oswego

County, where the Brombachs live. The Brombachs argue that the rental expenses
                                         - 15 -

[*15] they included in the offer documents were not for their primary residence, and

were above and beyond the expenses for the house. The documents are unclear--the

Brombachs claimed substantial home-office expenses in their prior year’s tax return,

and they also filed a Schedule E, Supplemental Income and Loss, for a rental

apartment with the same address as their home. The Brombachs seem to think that

the Appeals officer denied expenses related to the rental apartment, which they say

is on the same land but is not a part of their house. The Appeals officer, in his trial

testimony, said he reduced the housing expenses because they reflected home-office

expense deductions, and the Brombachs did not offer a counterargument. We

believe the Appeals officer’s description of what he did, and agree with him that he

did not err in disallowing expenses related to the Brombachs’ business use of their

home in calculating their housing expense.

      We have also repeatedly held that an Appeals officer does not abuse his

discretion by using local housing allowances lower than a taxpayer’s actual

housing expenses if the taxpayer has not shown that he will be harmed by having to

live on the lesser amount. Gregg v. Commissioner, T.C. Memo. 2009-19, 2009

WL 211413, at *8; McDonough v. Commissioner, T.C. Memo. 2006-234, 2006

WL 3096036, at *7. The Appeals officer in this case allowed housing expenses
                                        - 16 -

[*16] higher than the local allowance, though $300 less than Brombach had

claimed.8 This was not a clear error, and so no abuse of discretion occurred.

                    b.    Transportation Expenses

      The second area of difference is transportation expenses, another category for

which the IRS has standard local allowances. The Appeals officer lowered this

amount because he found that some of it was deducted on the Brombachs’ Schedule

C as a business expense for 2005. The Appeals officer also said that he increased

the amount of the “other expenses” category to include certain business expenses,

which may well include the missing transportation allowance. Brombach disputed

the reduction in his petition, but didn’t follow through with arguments on brief or at

trial, so we find that Brombach has conceded the reduction.




      8
         The IRM in effect during Brombach’s CDP hearing lists the housing
standard in Oswego County as $1,135 for a family of three, IRM ex. 5.15.1-8 (Jan.
1, 2005), but the Appeals officer allowed $1,557. Though the IRS may have
increased the standard from the time the IRM was issued to the time of Brombach’s
offer, the parties agree that the Appeals officer allowed more than the standard
amount. The current standard is $1,483--still lower than the amount allowed for
Brombach’s RCP. See New York - Local Standards: Housing and Utilities,
http://www.irs.gov/businesses/small/article/0,,id=104830,00.html (last visited
August 2, 2012).
                                         - 17 -

[*17]                      c.     Monthly Tax Expenses

        Brombach’s dispute with the Appeals officer about how to estimate his

monthly tax expense is much hotter. Brombach estimated that he would owe $2,224

monthly. He calculated this by taking 10% of his $8,671 gross monthly wages,

$867, as his federal income-tax expense, and 7.65%, $663, for employment taxes.

He then added 8%, $694, as his monthly state-tax expense. The Appeals officer, on

the other hand, looked at the pay stub that Brombach submitted and saw that it

showed $777.87 in combined federal, state, and payroll taxes for a two-week pay

period. The Appeals officer multiplied this by 2.15, his approximation of the

number of pay periods in a month, and then multiplied the result by 12 to give him

$20,069, a forecast of the total yearly tax Brombach would pay. But he wasn’t

done--the Appeals officer knew that the Brombachs had gotten a refund of $4,591

the previous year, and he subtracted this amount (divided by 12) to get Brombach’s

average monthly tax expense.

        The Brombachs say this is wrong for several reasons. The first is that they

think the Appeals officer should have done his averaging based on the cumulative

amount of taxes paid through March 10, 2006--Brombach paid $4,417.53 in taxes
                                        - 18 -

[*18] in his first five pay periods of the year.9 They argue that Brombach’s work

schedule is erratic, with different pay periods having different numbers of hours,

different amounts of overtime, and different taxes paid to different states. They also

say the Appeals officer shouldn’t have deducted the previous year’s refund because

it was just unusually large, not evidence that Brombach inflated his tax expense

through overwithholding.

      We agree with the Brombachs in part. They submitted credible

documentation showing that the March 10 pay stub, which represented income

earned in the last two weeks of February, was for a short pay period of only 80

hours, whereas most of the pay periods in the year had 88 or 96 hours. Brombach

didn’t base his monthly income estimate on this short pay period (which would have

given him only $7,527 in monthly income), and we think he’s right that his tax

expense shouldn’t be based on projecting from this short pay period either. As

Brombach admits, however, basing his monthly tax expense on the cumulative

withholding yields $1,900, not the $2,224 he claimed in his offer.

      But he loses altogether on the refund issue. Although he urges us to look at

his 2004 and 2006 tax returns, he never introduced them into either the


      9
       Although documents submitted with the offer seem to show that these taxes
were paid in four pay periods, Brombach says on brief that it was five.
                                        - 19 -

[*19] administrative or the trial record. We are left with only the 2005 tax return,

which shows deductions for a grandchild whom Brombach supported, large amounts

of unreimbursed employee expenses, Schedule C losses from three businesses,

Schedule E losses from rental real estate, and deductions for the business use of his

home. Brombach didn’t present any evidence that these expenses had gone away--

in fact, his offer included expenses based on national and local standards for a three-

person household which would include his grandchild, substantial unreimbursed

employee expenses, no income from his businesses, and no net rental income

because of sizable costs associated with the rental apartment. The Appeals officer

did not clearly err in concluding that the Brombachs would get a similarly large

refund in 2005.

      Overall, the best Brombach can hope for on his monthly tax expense is

$1,900 less his 2005 refund divided by 12. This number is $1,517.

                    d.    “Other Expenses”

      Brombach didn’t contest the Appeals officer’s reduction in his monthly

secured debt, or the increase in his “other expenses” category, so we deem those

conceded.
                                          - 20 -

[*20]               2.       Recalculated Income and Expenses

        Brombach’s gross income was $8,671 per month. At the very most, his

allowable expenses were as follows:

                           Category                  Value
                   Food, clothing, etc.             $1,390
                   Housing/utilities                  1,557
                   Transportation                     1,172
                   Health care                         720
                   Taxes                              1,517
                   Life insurance                      151
                   Other secured debt                  -0-
                   Other expenses                     1,070
                     Total                            7,577

        This leaves $1,094 in extra monthly income for Brombach. The Appeals

officer found that there were 37 months remaining under the statute of limitations for

collections, and Brombach doesn’t disagree, so we multiply the excess monthly

income by 37 and find that Brombach’s RCP should include at least $40,478 in

extra monthly income.

        C.    Brombach’s Offer Versus RCP

        Putting this all together, we find that Brombach’s lowest conceivable RCP

would look like this:
                                         - 21 -

                           [*21] Item                Value
                       Motorcycle equity            $4,645
                       401(k)                       28,000
                       Bank account                     389
                       Excess income                40,478
                        Total                       73,512

      The Commissioner will generally accept an offer-in-compromise based on

doubt as to collectibility only if it equals a taxpayer’s RCP. Rev. Proc. 2003-71,

sec. 4.02(2), 2003-2 C.B. 517, 517. But even in the light of our recalculation of

Brombach’s RCP--bending in his favor in every reasonable way--his offer still falls

short by more than $45,000. We have consistently held that the Commissioner

doesn’t abuse his discretion by rejecting an offer-in-compromise that falls short of a

taxpayer’s RCP. Murphy v. Commissioner, 125 T.C. 301, 320-21 (2005), aff’d,

469 F.3d 27 (1st Cir. 2006); Lemann v. Commissioner, T.C. Memo. 2006-37, 2006

WL 549206, at *10; see also McClanahan v. Commissioner, T.C. Memo. 2008-161,

2008 WL 2550665, at *5.

      Since Brombach offered less than his RCP, the only thing that could save his

offer is if the Appeals officer abused his discretion in failing to consider the special

circumstances Brombach raised, or if he failed to meet some procedural requirement

of the CDP process.
                                         - 22 -

[*22] II.   Special Circumstances

       In some cases, the Commissioner will accept an offer of less than the

reasonable collection potential if there are “special circumstances.” Rev. Proc.

2003-71, sec. 4.02(2), 2003-2 C.B. at 517. Special circumstances are: (1)

Circumstances demonstrating that the taxpayer would suffer economic hardship if

the IRS were to collect from him an amount equal to the RCP; or (2)

circumstances justifying acceptance of an amount less than the RCP based on

considerations of public policy or equity. See Murphy, 125 T.C. at 309 (citing

IRM pt. 5.8.4.3(4) (Sept. 1, 2005)).

       Brombach first makes a procedural argument. He contends that the

Commissioner should have given reasons in the notice of determination for

finding that no special circumstances existed. He argues that the Commissioner’s

failure to do so is by itself proof that the Commissioner acted arbitrarily.

       But that’s not the law. The Commissioner does not need to list in the notice

of determination every single fact that he considered. See Barnes v.

Commissioner, T.C. Memo. 2006-150, 2006 WL 2052884, at *7. The

Commissioner’s failure to tell Brombach in detail how he decided that Brombach

faced no special circumstances was therefore not an abuse of discretion. See
                                        - 23 -

[*23] Sullivan v. Commissioner, T.C. Memo. 2009-4, 2009 WL 20979, at *14;

Johnson v. Commissioner, T.C. Memo. 2007-29, 2007 WL 415139, at *9.

      That doesn’t mean the Commissioner can avoid any challenge to his

reasoning by hiding it from us and the taxpayer. But it does mean that Brombach

still has to persuade us that he faced some special circumstances. Brombach argues

first that the Commissioner failed to realize the economic hardship that both he and

his wife would endure if required to make a payment equal to his RCP. Section

301.6343-1(b)(4)(i), Proced. & Admin. Regs., finds economic hardship when a

taxpayer is “unable to pay his or her reasonable basic living expenses.” Section

301.7122-1(c)(3)(iii), Proced. & Admin. Regs., offers examples of economic

hardship, including: (1) a taxpayer who provides full-time care to a dependent child

with a serious long-term illness and must use equity in his assets to provide for basic

living expenses and medical care for his child; (2) a retired taxpayer who, if his only

source of income--a retirement account--were liquidated, would be unable to pay his

basic living expenses; or (3) a disabled taxpayer with a fixed income, limited

earning potential, and a modest home specially equipped to accommodate his

disability, the forced sale of which would cause him severe harm. Sec. 301.7122-

1(c)(3)(iii), Examples (1), (2), and (3), Proced. & Admin. Regs.
                                         - 24 -

[*24] These examples illustrate the types of economic hardship that the

Commissioner should be looking for when considering whether to accept an offer-

in-compromise based on doubt as to collectibility with special circumstances. The

record here shows that Brombach was living far from such dire circumstances as

those described in these examples. He had a home worth $175,000--apparently

with a separate rental unit--and he owned two cars and two motorcycles. Economic

hardship does not include the maintenance of an affluent standard of living, see sec.

301.6343-1(b)(4)(i), Proced. & Admin. Regs., and we don’t think Brombach was

living in luxury. But living a reasonable middle-class lifestyle is not a special

circumstance.

      We also think it important that Brombach was not retired when he submitted

his offer. He was still earning income, and there’s nothing in the record suggesting

his wife is unable to work or is not currently working, too. The key question is

whether, after collection of an amount equal to his reasonable collection potential, a

taxpayer will be left with adequate means to provide for basic living expenses. The

record shows that the Brombachs will.

      Brombach also claims that the Commissioner failed to adequately consider

his age, health, retirement status, medical costs, and the likelihood of future

increases in medical costs as applied to both him and his wife. There is, however,
                                         - 25 -

[*25] nothing in the record substantiating any such future costs. In Johnson, 2007

WL 415139, at *6, we said that it was not arbitrary or capricious for the

Commissioner to ignore speculative future costs in making a final determination.

We can’t say on the record in this case that the Commissioner abused his discretion

in denying Brombach’s request for an offer-in-compromise based on doubt as to

collectibility with special circumstances. See also Blondheim v. Commissioner,

T.C. Memo. 2006-216, 2006 WL 2873061, at *6 (no abuse in disallowing

speculative future medical costs); Fargo v. Commissioner, 447 F.3d 706, 710 (9th

Cir. 2006) (same), aff’g T.C. Memo. 2004-13.

      Even if Brombach had proved economic hardship, the Commissioner’s

guidelines and procedures still would have recommended that Brombach’s request

be denied. “The existence of economic hardship criteria does not dictate that an

offer must be accepted. * * * When hardship criteria are identified but the taxpayer

does not offer an acceptable amount, the offer should not be recommended for

acceptance.” IRM pt. 5.8.11.2.1(11) (Sept. 1, 2005). Brombach offered $28,000 to

compromise his tax debt, but even if we give him every reasonable benefit of the

doubt, his RCP still comes out considerably higher than his offer. This Court has

held that it can’t be an abuse of discretion to reject an offer-in-compromise that

bears no relationship to the taxpayer’s own calculation of his ability to pay.
                                        - 26 -

[*26] Atchison v. Commissioner, T.C. Memo. 2009-8, 2009 WL 89218, at *3;

Estate of Andrews v. Commissioner, T.C. Memo. 2007-30, 2007 WL 415110, at

*7; Hubbart v. Commissioner, T.C. Memo. 2007-26, 2007 WL 397067, at *8.

Thus, even if Brombach had demonstrated special circumstances, the Commissioner

could still have rejected Brombach’s offer-in-compromise without committing an

abuse of discretion.

III.   Duty To Dicker

       The Appeals officer credibly testified that “We were so far apart that we

didn’t get into * * * the negotiation of one or two particular items [that] would have

brought us together.” Citing this refusal, Brombach makes one final procedural

argument--that the Commissioner failed to give him an opportunity to negotiate or

amend his offer before issuing the notice of determination, and that this was itself an

abuse of discretion.

       An Appeals officer cannot simply reject an offer solely on the basis of the

offer’s amount without evaluating it under the Secretary’s policies and procedures.

See sec. 301.7122-1(f)(3), Proced. & Admin. Regs. But Brombach doesn’t point us

to, and we have not found, any legal authority that imposes a duty on the IRS to

negotiate a collection alternative in any particular way. He does point to one source

that seems to impose a lesser duty on the Appeals officer--a duty to give the
                                         - 27 -

[*27] taxpayer a chance to match the RCP before outright rejection. Brombach says

the Commissioner’s offer-in-compromise explanation packet states: “The examiner

may decide that a larger offer amount is necessary to justify acceptance. You will

have the opportunity to amend your offer.” Form 656-B, Offer in Compromise

Booklet (March 2009), at 15. This language suggests that if the examiner finds that

a higher offer might be accepted, he’ll at least give the taxpayer a chance to take it

or leave it. This is not what happened in Brombach’s case. He sent in an offer and

received a rejection. While it’s understandably frustrating to Brombach that the

guidelines weren’t followed in his case, instructions and other IRS publications are

not authoritative sources of federal tax law. Casa de La Jolla Park, Inc. v.

Commissioner, 94 T.C. 384, 396 (1990). Taxpayers must look to authoritative

sources of Federal tax law such as statutes, regulations, and judicial decisions and

not to informal publications provided by the IRS. Zimmerman v. Commissioner, 71

T.C. 367, 371 (1978), aff’d, 614 F.2d 1294 (2d Cir. 1979).

      Though neither the Brombachs nor the Commissioner mentions it, the IRM

contains a similar provision, directing Appeals officers to give taxpayers an

opportunity to match the minimum acceptable amount before rejection. IRM pt.

5.8.4.6 (Sept. 1, 2005). This source may seem more authoritative than an IRS
                                        - 28 -

[*28] booklet, but it isn’t--the IRM is not a source of rights enforceable by

taxpayers. Fargo, 447 F.3d at 713 (citing cases from five other circuits); Vallone v.

Commissioner, 88 T.C. 794, 807-08 (1987) (“I.R.M. requirements are necessarily

merely directory and not mandatory and noncompliance does not render the action

of the * * * [IRS] invalid.”) (citing United States v. Horne, 714 F.2d 206, 207 (1st

Cir. 1983)).

      Brombach hasn’t shown that an opportunity to amend his offer is required by

the Constitution or by any statute, regulations, or caselaw. The opportunity to

amend an offer is not a taxpayer’s right but is within the Commissioner’s discretion,

and the Commissioner has no binding duty to negotiate with a taxpayer before

rejecting his offer. See Kreit Mech. Assocs., Inc. v. Commissioner, 137 T.C. 123,

134 (2011); Estate of Mangiardi v. Commissioner, T.C. Memo. 2011-24, 2011 WL

280925, at *6, aff’d, 442 Fed. Appx. 526 (11th Cir. 2011); Schwartz v.

Commissioner, T.C. Memo. 2008-117, 2008 WL 1862652, at *4, aff’d, 348 Fed.

Appx. 806 (3d Cir. 2009); Catlow v. Commissioner, T.C. Memo. 2007-47, 2007

WL 623782, at *10; see also Fargo, 447 F.3d at 713.10 We are left to conclude that

      10
          In Samuel v. Commissioner, T.C. Memo. 2007-312, 2007 WL 2990112,
the taxpayer offered $30,000 to settle a multiyear tax debt of over $700,000. The
IRS had computed his RCP to be $133,158, but we found mistakes and recomputed
the right number to be slightly over $107,000. Id. at *9. And, relying on IRM pt.
5.8.4.6 (Sept. 1, 2005), we held in Samuel that the IRS abused its discretion in not
                                                                        (continued...)
                                         - 29 -

[*29] the Appeals officer did not err as a matter of law because the IRM and IRS

instructions are not law. And we cannot conclude that he ruled irrationally in

rejecting an offer that was substantially lower than the RCP. See Johnson v.

Commissioner, 136 T.C. 475, 491-92 (2011); Vanmali v. Commissioner, T.C.

Memo. 2012-100, 2012 WL 1165493, at *3; Litwak v. Commissioner, T.C. Memo.

2009-292, 2009 WL 4980473, at *5, aff’d, 473 Fed. Appx. 709 (9th Cir. 2012);

Atchison, 2009 WL 89218, at *3.

      The Appeals officer believed that the IRS and Brombach were too far apart to

negotiate successfully. We cannot conclude on the record in this case that his belief

was an abuse of discretion.

IV.   Conclusion

      Although the Appeals officer definitely made some mistakes in calculating

Brombach’s RCP, and may have made others, Brombach’s offer was still lower


      10
         (...continued)
giving the taxpayer a chance to match the adjusted RCP of $107,000. Id. We
remanded for the limited purpose of allowing Samuel the chance to do so. Id. It
seems that neither party in that case brought to the attention of the Court either the
line of cases holding an Appeals officer does not abuse his discretion where the
reduced RCP is more than the taxpayer’s offer or the numerous cases holding the
IRM not to have the force of law. We have since definitively held in Kreit
Mechanical, a T.C. opinion, that the Commissioner has no duty to negotiate with a
taxpayer before rejecting his offer-in-compromise, and this would seem to have
drained Samuel of its vitality.
                                        - 30 -

[*30] than his RCP, so that its rejection was not an abuse of discretion. The

Commissioner also did not abuse his discretion in finding that Brombach had not

substantiated any special circumstances that might have justified his low offer. Nor

did Brombach identify any procedural errors that would amount to an abuse of

discretion. We therefore sustain the determination to uphold the lien.


                                                 Decision will be entered for

                                       respondent.
