United States v. Ryan

United States Court of Appeals,

Eleventh Circuit.

No. 94-6724.

In re Alvin R. RYAN, Sandra L. Ryan, Debtors.

UNITED STATES of America, Plaintiff-Appellant,

v.

Alvin R. RYAN, Sandra L. Ryan, Defendants-Appellees.

Sept. 26, 1995.

Appeal from the United States District Court for the Southern
District of Alabama. (No. 94-0142-RV-M), Richard W. Vollmer, Jr.,
Judge.

Before TJOFLAT, Chief Judge, CARNES, Circuit Judge, and JOHNSON,
Senior Circuit Judge.

CARNES, Circuit Judge:

Alvin R. and Sandra L. Ryan overpaid their income tax one year

and requested the Internal Revenue Service to apply that

overpayment to their unpaid liability for the previous tax year.

Instead, the IRS applied that overpayment to the Ryans' tax

liability for a different year. After filing for bankruptcy, the

Ryans brought an adversary proceeding against the United States in

the bankruptcy court, contending that the IRS should have followed

their directions about application of the tax overpayment. The

bankruptcy court agreed and issued a turnover order under 11 U.S.C.

§ 542, requiring the IRS either to reallocate the overpayment

according to the Ryans' original directions or to pay the amount to

the bankruptcy trustee. The district court affirmed.

In this appeal, the government contends that the bankruptcy

court lacked jurisdiction to issue the turnover order, and

alternatively that the court erred in determining that the IRS was
required to comply with the Ryans' instructions about how to apply

their overpayment. We disagree with the government's first

contention, but agree with the second.
I. BACKGROUND

The facts in this case were stipulated by the parties in the

bankruptcy court and are not in dispute. The Ryans reported on

their federal income tax return for the 1990 tax year that they had

overpaid their federal income tax liability that year by $1,319.00.

The overpayment resulted from the Ryans asking their employers to

withhold more than eventually became due as income tax. In a

letter attached to their 1990 return, the Ryans requested that the

IRS apply that overpayment to their unpaid income tax liability for

the 1989 tax year. The Ryans owed approximately $1,000.00 of their

1989 income tax, and in addition, still owed income tax for the

1986, 1987, and 1988 tax years. The IRS refused the Ryans' request

and informed them that it had applied the overpayment to their 1986

tax liability instead of their 1989 tax liability.

Thirteen months later, in December 1992, the Ryans filed for

bankruptcy under Chapter 7 of the Bankruptcy Code. The IRS did not

file a claim because the Ryans had no assets available for

distribution. The Ryans received a discharge in May of 1993.

The Ryans subsequently brought an adversary proceeding against

the government in the bankruptcy court. In their complaint, they

asked the court to declare that their 1986, 1987, and 1988 income

tax liabilities were discharged under 11 U.S.C. 523, and to

determine the amount of their 1989 tax liability, which they
conceded was nondischargeable.1 With the ultimate goal of applying

their overpayment to the tax liability that was not discharged, the

Ryans argued that because their 1990 overpayment was a voluntary

payment of taxes, the IRS was required to follow their instructions

about how to allocate that payment. Since the overpayment exceeded

the amount they owed for 1989, they contended that they had no

income tax liability for 1989. The government responded that the

Ryans did not have the power to control the application of their

1990 overpayment, because 26 U.S.C. § 6402(a) gives the IRS full

discretion to credit a tax overpayment against any tax liability of

the person who made the overpayment.

The bankruptcy court agreed with the Ryans. It found that the

Ryans' tax liabilities for 1986, 1987, and 1988 were discharged, a

determination that is not challenged here. As for the 1989 tax

year, the court found that the IRS should have honored the Ryans'

request to apply the 1990 tax year overpayment to their 1989 tax

liability. The bankruptcy court explained that when a tax payment

is voluntary, the taxpayer may direct how the payment should be

applied, and that the payment in this case was voluntary.

According to the court, by ignoring the Ryans' request and

crediting the overpayment against the 1986 tax liability, the IRS

had effectively "seized" the overpayment. The court found that

property seized by the IRS to satisfy a tax lien is subject to a

1
Because the 1989 return was due "after three years before
the date of the filing of the petition," 11 U.S.C.A. §
507(a)(7)(A)(i) (West 1993) (currently codified at 11 U.S.C.A. §
507(a)(8)(A)(i) (West Supp.1995)); 11 U.S.C.A. § 523(a)(1)(A)
(West 1993 and Supp.1995), the parties agreed that the Ryans'
1989 tax liability was excepted from discharge.
turnover order under 11 U.S.C. § 542. Consequently, the court

ordered the IRS either to apply the overpayment to the

nondischarged 1989 tax liability, or to refund the overpayment to

the bankruptcy trustee.

The government appealed to the district court, which affirmed

without opinion. This appeal followed.
II. DISCUSSION OF JURISDICTION

Before proceeding to the merits of this case, we first

address a jurisdictional challenge raised by the government. The

government argues that the statutory provision relied on by the

bankruptcy court, 11 U.S.C. § 542, did not authorize the bankruptcy

court's order in this case. Instead, the government contends, the

appropriate procedure in this case was for the Ryans to file for a

tax refund. Arguing that the Ryans failed to demonstrate that they

had complied with the requisite procedures for obtaining an income

tax refund, the government asserts that the court had no

jurisdiction to issue an order reallocating the overpayment.

Section 542 of the Bankruptcy Code, with certain exceptions,

requires an entity to turn over to the bankruptcy trustee any

property of the debtor and to pay the trustee any debts owed to the

debtor. See generally 4 Collier on Bankruptcy ¶ 542.01 (Lawrence

P. King, ed., 15th ed. 1995). The statute provides, in relevant

part:
Turnover of property to the estate

(a) Except as provided in subsection (c) or (d) of this
section, an entity, other than a custodian, in possession,
custody, or control, during the case, of property that the
trustee may use, sell, or lease under section 363 of this
title, or that the debtor may exempt under section 522 of this
title, shall deliver to the trustee, and account for, such
 property or the value of such property, unless such property
is of inconsequential value or benefit to the estate.

(b) Except as provided in subsection (c) or (d) of this
section, an entity that owes a debt that is property of the
estate and that is matured, payable on demand, or payable on
order, shall pay such debt to, or on the order of, the
trustee, except to the extent that such debt may be offset
under section 553 of this title against a claim against the
debtor.

11 U.S.C.A. § 542(a), (b) (West 1993).

According to the government, neither subsection (a) nor

subsection (b) of § 542 authorized the bankruptcy court to order

the IRS to turnover the Ryans' overpayment. The government

contends that subsection (a), the provision specifically relied

upon by the bankruptcy court, applies only to property in which the

debtor had an interest as of the commencement of the bankruptcy

case. Section 542(a) applies to property "that the trustee may

use, sell, or lease under section 363...." 11 U.S.C.A. § 542(a)

(West 1993). The trustee may use, sell, or lease "property of the

estate," 11 U.S.C.A. § 363(b)(1) (West Supp.1995), which is defined

in part as "all legal or equitable interests of the debtor in

property as of the commencement of the case," 11 U.S.C.A. §

541(a)(1) (West 1993). Because the IRS had credited the

overpayment to the 1986 liability thirteen months prior to the

commencement of the bankruptcy case, the government argues that the

debtors no longer had any legal or equitable interest in the

overpayment. In other words, the overpayment no longer existed

once the IRS applied it to the 1986 tax liability.

In addition, the government argues that § 542(b), which was

not specifically cited by the bankruptcy court, also is

inapplicable. That provision requires an entity to pay any matured
debt owed to the debtor, "except to the extent that such debt may

be offset...." 11 U.S.C.A. § 542(b) (West 1993). The government

argues that even if the overpayment existed at the time of the

bankruptcy case, the government would not be required to refund it

to the trustee because the IRS was authorized under 26 U.S.C. §

6402 to offset it against the 1986 tax liability.

The bankruptcy court relied upon United States v. Whiting

Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983),

which held that § 542(a) allowed a bankruptcy court to order the

turnover of personal property the IRS had seized prior to

bankruptcy in order to satisfy a tax lien. 462 U.S. at 208-09, 103

S.Ct. at 2315-16. That decision is inapplicable here, the

government contends, because the debtor in Whiting Pools retained

an equitable interest in the seized property until it was sold,

even though he had lost possession of the property. In contrast,

the Ryans no longer had any property interest in the 1990

overpayment after the IRS extinguished the overpayment by applying

it to another year's tax liability.

Moreover, the government argues, money paid into the United

States Treasury is not identifiable property subject to a turnover

order. In United States v. Nordic Village, Inc., 503 U.S. 30, 112

S.Ct. 1011, 117 L.Ed.2d 181 (1992), the Supreme Court held that a

bankruptcy court's in rem jurisdiction did not allow a bankruptcy

trustee to recover an unauthorized postpetition transfer to the IRS

when the Bankruptcy Code had not otherwise waived the government's

sovereign immunity from a trustee's claim for monetary relief. Id.
at 38-39, 112 S.Ct. at 1017.2 In reaching this conclusion, the

Court reasoned that the trustee "sought to recover a sum of money,

not "particular dollars,' " and thus "there was no res to which the

court's in rem jurisdiction could have attached." Id. The Nordic

Village Court distinguished Whiting Pools on the grounds that a

"suit for payment of funds from the Treasury is quite different

from a suit for the return of tangible property in which the debtor

retained ownership." Id. According to the government, Nordic

Village supports its contention that an overpayment of taxes is not

the type of property that can be subject to a turnover order by the

bankruptcy court.

Instead, the government contends, the Ryans' action to have

their 1990 overpayment credited against their 1989 tax liability is

a really a suit for a tax refund. The government cites United

States v. Dalm, 494 U.S. 596, 609 n. 6, 110 S.Ct. 1361, 1368 n. 6,

108 L.Ed.2d 548 (1990), which held that there is no distinction

between "refund actions and suits for funds wrongfully retained,"

and that a refund action is appropriate when "a taxpayer pays more

than is owed, for whatever reason or no reason at all." The

government argues that the bankruptcy court did not have the power

to order a refund, because the Ryans failed to establish that they

satisfied the jurisdictional prerequisites for a refund action.

2
Nordic Village's restrictive reading of the Bankruptcy
Code's waiver of sovereign immunity was superseded by the 1994
amendments to the Bankruptcy Code. As the government
acknowledges, sovereign immunity is not an issue in this case,
because the Bankruptcy Reform Act provides for retroactive
application of the Code's waiver of sovereign immunity. See
Bankruptcy Reform Act of 1994, Pub.L. No. 103-394, §§ 113,
702(b)(2)(B), 108 Stat. 4106, 4117-18, 4150.
 We need not decide whether a § 542 turnover order can ever be

an appropriate means of retrieving tax overpayments, or if instead,

as the government contends, the only proper means is through a

refund action. Even assuming that the government is correct about

the inapplicability of turnover jurisdiction to these facts, the

bankruptcy court still had jurisdiction, because the Ryans did

satisfy the procedural requirements for bringing a refund action.

Under § 505 of the Bankruptcy Code, a bankruptcy court is

given the power to "determine the amount or legality of any

tax...." 11 U.S.C.A. § 505(a)(1) (West 1993). However, § 505 also

expressly prohibits the court from determining "any right of the

estate to a tax refund, before the earlier of ... (i) 120 days

after the trustee properly requests such refund from the

governmental unit from which such refund is claimed; or (ii) a

determination by such governmental unit of such request." 11

U.S.C.A. § 505(2)(B) (West 1993). In addition to the limitation in

§ 505(2)(B) of the Bankruptcy Code, the Internal Revenue Code

prescribes a similar restriction on the ability of a court to

determine a taxpayer's right to a refund:

No suit or proceeding shall be maintained in any court for the
recovery of any internal revenue tax alleged to have been
erroneously or illegally assessed or collected ... or of any
sum alleged to have been excessive or in any manner wrongfully
collected, until a claim for refund or credit has been duly
filed with the Secretary....

26 U.S.C.A. § 7422(a) (West 1989) (emphasis added). The requisite

administrative claim must be filed with the IRS within three years

after the return was filed, or within two years after the tax was

paid. 26 U.S.C.A. § 6511(a) (West Supp.1995). It is these

procedural requirements that the government contends were not met,
thus depriving the bankruptcy court of jurisdiction over the matter

in this case.

The Supreme Court has held that unless a claim for refund has

been properly filed within the applicable time period, a suit for

refund "may not be maintained in any court." Dalm, 494 U.S. at

602, 110 S.Ct. at 1365; see also Mutual Assurance, Inc. v. United

States, 56 F.3d 1353, 1355-56 (11th Cir.1995) ("[A] taxpayer's

filing of an administrative refund claim with the IRS in accordance

with the relevant provisions of the Internal Revenue Code is a

jurisdictional prerequisite to the maintenance of a tax refund

suit."); Charter Co. v. United States, 971 F.2d 1576, 1579 (11th

Cir.1992) ("A taxpayer may not sue the United States for a tax

refund until it first files a refund claim with the government.");

Vintilla v. United States, 931 F.2d 1444, 1446 (11th Cir.1991)

(explaining that, under Dalm, timely claim for refund is

jurisdictional requirement in tax refund suits); In re Graham, 981

F.2d 1135, 1138 (10th Cir.1992) (holding that bankruptcy court

erred in awarding tax refund because §§ 505 and 7422 are

"nonwaivable jurisdictional requirements"); In re Smith, 921 F.2d

136, 139 (8th Cir.1990) (holding that bankruptcy court's turnover

order against the IRS would be barred in absence of timely claim

for refund).

Under the relevant Treasury Regulations, a properly executed

income tax return "shall constitute a claim for refund or credit

within the meaning of section 6402 and section 6511 for the amount

of the overpayment disclosed by such return...." 26 C.F.R. §

301.6402-3(a)(5) (1994). The regulations also state that a "claim
must set forth in detail each ground upon which a ... refund is

claimed and facts sufficient to apprise the Commissioner of the

exact basis thereof.... A claim which does not comply with this

paragraph will not be considered for any purpose as a claim for

refund or credit." 26 C.F.R. § 301.6402-2(b)(1) (1994). As we

have interpreted this requirement, "crystal clarity and exact

precision are not demanded," but "at a minimum the taxpayer must

identify in its refund claim the "essential requirements' of each

and every refund demand." Charter, 971 F.2d at 1580; see also

Sanders v. United States, 740 F.2d 886, 890 (11th Cir.1984) (noting

that under Treasury Regulations, taxpayer must "state the exact

basis" of his refund claim); Foyt v. United States, 561 F.2d 599,

604 (5th Cir.1977) ("[N]o refund will be allowed except on a ground

clearly stated and supported by facts sufficient to apprise the

Commissioner of the exact basis of the taxpayer's claim.");

Dahlgren v. United States, 553 F.2d 434, 441 (5th Cir.1977);

Stoller v. United States, 444 F.2d 1391, 1392-93 (5th Cir.1971).

Therefore, under 11 U.S.C. § 505 and 26 U.S.C. § 7422, in

order to decide whether the Ryans can bring an action in the

bankruptcy court for refund of their 1990 tax overpayment,3 we must

ascertain whether they had previously presented an administrative

claim that satisfied the "essential requirements test" and that was

3
The government contends in its brief that the Ryans were
required to file a claim for refund of their "1986 tax
liability." (emphasis added). However, the 1990 tax year is the
appropriate subject of a refund action because that is the year
that the Ryans overpaid their taxes. Moreover, if the Ryans
properly filed a claim for refund of their 1990 overpayment—as we
conclude in this case—they would not be required to file an
additional claim for the 1986 tax year simply because that was
the liability to which the overpayment was applied.
timely filed. Our consideration of these issues is somewhat

handicapped by the fact that the Ryans' 1990 income tax return has

not been included in the record on appeal. Normally, the Ryans'

failure to include the return would prevent us from deciding

whether the tax return met the requirements for filing a refund

claim, and thus deciding whether we have jurisdiction. However, in

this case, we believe that the facts upon which the parties have

agreed in their stipulation and in their briefs to this Court are

sufficient to show that the Ryans filed a proper and timely refund

claim. Thus we are able to conclude that the jurisdictional

prerequisites have been met without reviewing the 1990 income tax

return, which is the actual claim for refund.

As stated previously, under the Treasury Regulations, an

income tax return is sufficient to constitute a claim for refund,

but it must state the "essential requirements" of the refund

demand. The parties in this case agree that the Ryans' 1990 income

tax return reported an overpayment and that, in a written request

filed with the return, the Ryans instructed the IRS to apply the

overpayment to their outstanding tax liability for 1989. Moreover,

as the government acknowledges, the Ryans' return specifically

indicated that their overpayment was caused by excess employer

withholding and stated the exact amount that they claimed had been

overpaid to the government.

These undisputed facts show that the Ryans' 1990 income tax

return sufficiently set forth the essential requirements of a

refund claim. Because their return specifically indicated the

source and amount of their overpayment, "the Commissioner was not
... left to his own devices in order to discover the precise nature

of [the] taxpayer's claim...." Sanders, 740 F.2d at 890 (quotation

marks and citation omitted); see also Charter, 971 F.2d at 1579

(explaining that government is not required to "hazard a guess"

about substance of taxpayer's refund claim). There is not much

more the Ryans could have stated on their refund claim beyond that

which they did. Indeed, the fact that the IRS subsequently used

the Ryans' claimed overpayment to offset their 1986 tax liability

demonstrates that the IRS was provided with all the information

necessary to examine and resolve the Ryans' refund claim.

Finally, the stipulated facts show that the Ryans met the

statutory time limits for bringing a refund action on their 1990

overpayment. Section 505 was satisfied because the Ryans did not

bring their adversarial action against the government until after

a proper request for refund had been presented to, and denied by,

the IRS. See 11 U.S.C. § 505(2)(b). Moreover, because the refund

claim was filed simultaneously with the filing of their tax return,

and indeed as part of it, the claim came within the three-year

period prescribed by 26 U.S.C. § 6511(a). The procedural

prerequisites for a refund action were met.

For these reasons, we reject the government's challenge to the

bankruptcy court's jurisdiction. We turn now to the merits of the

appeal.
III. DISCUSSION OF MERITS

The bankruptcy court found that, under the IRS's "voluntary

payment rule," "if a payment of taxes is voluntary, the taxpayer

may direct how the payment is to be applied by the Internal Revenue
Service." Because the IRS had not taken any action to collect the

delinquent taxes for the prior years when the Ryans overpaid their

1990 taxes, the court concluded that the overpayment was voluntary

and that the IRS was required to follow the Ryans' instructions

about how to apply it. The issue of whether a taxpayer or the IRS

is entitled to determine how to allocate a tax overpayment among

various tax liabilities is a question of law subject to de novo

review. E.g., In re Haas, 48 F.3d 1153, 1155 (11th Cir.1995).

The government argues that 26 U.S.C. § 6402(a) specifically

authorizes the IRS to credit an overpayment against any tax

liability of a taxpayer. That statute states:

In the case of any overpayment, the Secretary, within the
applicable period of limitations, may credit the amount of
such overpayment, including any interest allowed thereon,
against any liability in respect of an internal revenue tax on
the part of the person who made the overpayment and shall,
subject to subsections (c) and (d), refund any balance to such
person.

26 U.S.C.A. § 6402(a) (West Supp.1995); see 26 U.S.C.A. §

6401(b)(1) (West 1989) (defining tax overpayment). The government

contends that the bankruptcy court erroneously applied the

voluntary payment rule instead of § 6402(a) in deciding that the

Ryans could designate how to apply their overpayment.

According to the government, under the voluntary payment rule,

when a taxpayer who has outstanding tax liabilities voluntarily

makes a payment, the IRS usually will honor a taxpayer's request

about how to apply that payment. However, the government

distinguishes partial payments of delinquent tax debts, to which no

statute applies and to which the IRS applies its voluntary payment

rule, from overpayments, which are governed by the clear rule of §
6402(a) and implementing regulations. Stating the government's

position another way: the voluntary payment rule applies when a

taxpayer voluntarily makes a partial payment on his tax liabilities

and designates the liability which should be credited at the time

the payment is made; on the other hand, § 6402(a), and not the

voluntary payment rule, applies to money that comes into the hands

of the government because of overpayment of a particular liability.

See generally Sorenson v. Secretary of Treasury, 475 U.S. 851, 861,

106 S.Ct. 1600, 1607, 89 L.Ed.2d 855 (1986) ("Sections 6401 and

6402 address the operation of the tax-refund process under the

Internal Revenue Code. They define the status of certain tax

credits, set up a mechanism for disbursing refunds, and direct the

Secretary to divert certain amounts from the refund process.").

The Ryans disagree with the government's attempt to

distinguish overpayments from partial payments. They contend that

the only question "is whether the payment is made under the

taxpayer's own volition." In defense of the bankruptcy court's

application of the voluntary payment rule, the Ryans cite a revenue

ruling issued by the IRS, which states: "A partial payment of

assessed tax, penalty, and interest made by a cash method taxpayer

with directions as to its application will be so applied."

Rev.Rul. 73-305, 1973-2 C.B. 43, modified by Rev.Rul. 79-284, 1979-

2 C.B. 83. However, that ruling, by its own terms, only applies to

partial payments. The Ryans do concede that § 6402(a) and the

accompanying regulations give the IRS the discretion to apply a tax

overpayment to any tax liability, but they argue that the IRS has

already exercised its discretion by publicly stating in a revenue
ruling that it will allow a taxpayer to control the allocation of

any payments that are voluntarily made. The Ryans contend that

Revenue Ruling 73-305 applies to all voluntary payments of taxes

and does not on its face exclude overpayments caused by excessive

withholding.

Because both parties agree that the statute, § 6402(a),

plainly gives the IRS the discretion to apply overpayments to any

tax liability, the issue in this case is a narrow one: whether the

IRS, despite this statutory grant of authority, has

administratively decided to restrict its discretion and abide by

the voluntary payment rule when a taxpayer makes an overpayment.

Whatever may be the situation with tax payments other than

overpayments—a question we need not address—we hold that the

government has convincingly demonstrated that the IRS has not

administratively restricted its authority to decide how to allocate

overpayments. In other words, the IRS has not extended its

voluntary payment rule to overpayments.

To support their position that the voluntary payment rule does

apply to overpayments such as the one in this case, both the

bankruptcy court and the Ryans cite an opinion from this Court,

which stated: "As a general rule, when a taxpayer directs the

manner in which a payment is to be allocated among various taxes

due, the Internal Revenue Service must comply with the taxpayer's

request." Matter of A & B Heating & Air Conditioning, 823 F.2d

462, 463 (11th Cir.1987), vacated and remanded, 486 U.S. 1002, 108

S.Ct. 1724, 100 L.Ed.2d 189, further opinion, 861 F.2d 1538 (11th

Cir.1988), remanding to be dismissed as moot, 878 F.2d 1311 (11th
Cir.1989). That decision is not binding on this Court because it

subsequently was vacated and dismissed, but even if it were still

law, it is distinguishable. Unlike this case, in A & B Heating

overpayments were not involved, and thus § 6402(a) was not

implicated. A & B Heating does not establish that the IRS applies

the voluntary payment rule to overpayments of taxes.

The Treasury Regulations promulgated under § 6402(a)

demonstrate that the IRS does not apply the voluntary payment rule

to overpayments. Mirroring the statute, the regulations authorize

the IRS to credit "any overpayment of tax" against "any outstanding

liability for any tax...." 26 C.F.R. § 301.6402-1 (1994). The

regulations further delineate that, when a taxpayer's withheld

wages exceed the amount of tax shown on his return, the IRS "may

make credit or refund of such overpayment without awaiting

examination of the completed return and without awaiting filing of

a claim for refund." 26 C.F.R. 301.6402-4 (1994). The regulations

do provide that a taxpayer can instruct the IRS to credit his

overpayment against the estimated tax for the taxable year

immediately succeeding the overpayment. 26 C.F.R. § 301.6402-

3(a)(5) (1994). However, the regulations also provide that the IRS

may override that election and apply the overpayment against "any

outstanding liability for any tax...." 26 C.F.R. § 301.6402-

3(a)(6)(i) (1994).

The Treasury Regulations, therefore, contradict the Ryans'

position that the IRS has chosen to restrict its statutorily

granted discretion to control the allocation of overpayments. To

the extent that the IRS has decided to give a taxpayer any ability
to designate the application of overpayments, it has limited the

taxpayer to requesting a credit for the succeeding tax year, and

even that request can be refused by the IRS. In this case, of

course, the taxpayers requested allocation of the overpayment not

to a succeeding tax year but to a particular prior year.

Our decision in this case is consistent with that of the

Second Circuit in Kalb v. United States, 505 F.2d 506 (2d

Cir.1974), cert. denied, 421 U.S. 979, 95 S.Ct. 1981, 44 L.Ed.2d

471 (1975). In that case, the Second Circuit rejected the argument

that, because a tax overpayment was voluntary, the IRS was bound to

comply with the taxpayer's direction about how to apply that

payment. Id. at 509. The Court held that § 6402(a) "clearly gives

the IRS discretion to apply a refund to "any liability' of the

taxpayer." Id. The Ryans have cited no instance in which the IRS

has specifically applied the voluntary payment rule to

overpayments, or any authority for the proposition that § 6402(a)

and the Treasury Regulations mean anything other than what they

clearly say.

We hold, therefore, that the bankruptcy court erred in

applying the voluntary payment rule to the Ryans' 1990 tax year

overpayment. Pursuant to clear statutory authority and the

implementing Treasure Regulations, the IRS has the discretion to

designate the application of overpayments among a taxpayer's

various tax liabilities.
IV. CONCLUSION

The district court's order affirming the turnover order of the

bankruptcy court is REVERSED.