Exclusion of Equity in Primary Residence for OIC


#1

Client has found blogs from other practitioners to the effect that taxpayers who were repeatedly turned down for a home equity loan were allowed to exclude their home equity from the OIC.

Does anyone have a cite for this in the IRM or elsewhere? Any experience with same?


#2

Hey Carl,
Great question. My initial answer was “no” but I did a little research! The IRM does reference the inability to borrow against the equity in assets under the Effective Tax Administration version of the OIC. It does not specifically state the equity will be disregarded. It only gives an argument to a finding of hardship.
IRM 5.8.11.2.1.6.c-

Hope this helps!
Jeff


#3

@Jeff @CSMCPA Jeffrey and Carl! Great topic and great information!!

The more that I work in this area the more that I realize that the IRS is NOT in the business of “pain”.

Meaning they are not supposed to create a hardship. SO if an action is taken that creates a “hardship”, there are protections built in the systems to prevent this.