Under the threat of a tax levy, the taxpayer decided to liquidate her retirement account in order to pay her back taxes. However, instead of sending her check to her tax attorney, she decided to send her payment directly to the IRS revenue officer with an accompanying letter which read as follows: “Enclosed, please find our firm IOTA trust check account number 2512 in the amount of $61,669, to be applied to our delinquent taxes. If you have any questions, please let Wally Anderson or me know.” The memo section of the check read: “Back Taxes”.

The IRS revenue officer followed his own discretion as to how to apply the payment to various tax periods with liabilities. His methodology favored the government to the detriment of the taxpayer who happened to be an attorney (but not a tax attorney). The taxpayer later challenged the way the revenue officer had applied her payments. The U.S. Tax Court held for the IRS. Tax Court Memo. 2016-211.