IRS Release-of-Levy Regulations

26 CFR § 301.7122-1(c)(3), examples 1–3

Example 1. The taxpayer has assets sufficient to satisfy the tax liability. The taxpayer provides full-time care and assistance to her dependent child, who has a serious long-term illness. It is expected that the taxpayer will need to use the equity in her assets to provide for adequate basic living expenses and medical care for her child. The taxpayer's overall compliance history does not weigh against compromise.

Example 2. The taxpayer is retired, and his only income is from a pension. The taxpayer's only asset is a retirement account, and the funds in the account are sufficient to satisfy the liability. Liquidation of the retirement account would leave the taxpayer without adequate means to provide for basic living expenses. The taxpayer's overall compliance history does not weigh against compromise.

Example 3. The taxpayer is disabled and lives on a fixed income that will not, after allowance of basic living expenses, permit full payment of his liability under an installment agreement. The taxpayer also owns a modest house that has been specially equipped to accommodate his disability. The taxpayer's equity in the house is sufficient to permit payment of the liability he owes. However, because of his disability and limited earning potential, the taxpayer is unable to obtain a mortgage or otherwise borrow against this equity. In addition, because the taxpayer's home has been specially equipped to accommodate his disability, a forced sale of the residence would create severe adverse consequences for the taxpayer. The taxpayer's overall compliance history does not weigh against compromise.