against their 2009 income tax liability.

      On February 28, 2011, respondent applied against petitioners’ 1995 income

tax liability the proceeds of the levy upon their bank account, $21,182.11 At some

point on or before March 7, 2011, respondent attempted to deposit petitioners’

January 27, 2011, check. The check did not clear, either because of the hold on

petitioners’ account (before February 28, 2011) or because the funds in the

account had been transferred to the IRS (after February 28, 2011). Because

petitioners’ check did not clear, respondent reversed application of the check

against their 2009 income tax liability.

      On July 15, 2011, after a series of preliminary exchanges between the

settlement officer (SO) and petitioners’ counsel, the SO issued petitioners a letter

noting that Appeals had receivedthe Texas Trust Code, as amended
      and in effect from time to time, and (ii) the construction, validity and
      administration of every trust created under this Will shall be governed
      by Texas law.

The Farkas trust held approximately $236,967 as of April 2011.17

      Over the course of March 2012 petitioners liquidated and paid over to

respondent all the assets listed in the December 2, 2011, letter (the proceeds of

which were applied against their 2011 income tax liability) except for one IRA,

one section 401(k) account, the insurance policy, and the Exxon Mobil stock. On

April 4, 2012, the SO issued petitioners another letter, noting that they had not yet

liquidated these remaining assets