United States v. James D. Paulson ( 2023 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 21-55197
Plaintiff-Appellant, D.C. No.
3:15-cv-02057-
v. AJB-NLS
JAMES D. PAULSON, individually;
and as statutory executor of the Estate OPINION
of Allen E. Paulson; VIKKI E.
PAULSON, individually; and as
statutory executor of the Estate of
Allen E. Paulson; and as Co-Trustee of
the Allen E. Paulson Living Trust;
CRYSTAL CHRISTENSEN,
individually; and as statutory executor
of the Estate of Allen E. Paulson; and
as Co-Trustee of the Allen E. Paulson
Living Trust; MADELEINE
PICKENS, individually; and as
statutory executor of the Estate of
Allen E. Paulson; and as Trustee of the
Marital Trust created under the Allen
E. Paulson Living Trust; and as
Trustee of the Madeleine Anne
Paulson Separate Property Trust,
Defendants-Appellees.
2 UNITED STATES V. PAULSON
UNITED STATES OF AMERICA, No. 21-55230
Plaintiff-Appellee, D.C. No.
3:15-cv-02057-
v. AJB-NLS
JOHN MICHAEL PAULSON,
individually; and as Executor of the
Estate of Allen E. Paulson; JAMES D.
PAULSON, individually; and as
statutory executor of the Estate of
Allen E. Paulson, MADELEINE
PICKENS, individually; and as
statutory executor of the Estate of
Allen E. Paulson; and as Trustee of the
Marital Trust created under the Allen
E. Paulson Living Trust; and as
Trustee of the Madeleine Anne
Paulson Separate Property Trust,
Defendants,
and
VIKKI E. PAULSON, individually;
and as statutory executor of the Estate
of Allen E. Paulson; and as Co-Trustee
of the Allen E. Paulson Living Trust;
CRYSTAL CHRISTENSEN,
individually; and as statutory executor
of the Estate of Allen E. Paulson; and
as Co-Trustee of the Allen E. Paulson
UNITED STATES V. PAULSON 3
Living Trust,
Defendants-Appellants.
Appeal from the United States District Court
for the Southern District of California
Anthony J. Battaglia, District Judge, Presiding
Argued and Submitted February 11, 2022
San Francisco, California
Filed May 17, 2023
Before: Kim McLane Wardlaw, Sandra S. Ikuta, and
Bridget S. Bade, Circuit Judges.
Opinion by Judge Bade;
Dissent by Judge Ikuta
SUMMARY *
Tax
The panel reversed the district court’s judgment in favor
of defendants, and remanded with instructions to enter
judgment in favor of the government on its claims for estate
taxes, and to conduct any further proceedings necessary to
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 UNITED STATES V. PAULSON
determine the amount of each defendant’s liability for
unpaid taxes.
The United States sued several heirs of Allen Paulson,
alleging that they were trustees of Paulson’s trust or received
estate property as transferees or beneficiaries, and were thus
personally liable for estate taxes under 26 U.S.C.
§ 6324(a)(2). The United States also alleged that two of the
heirs, Vikki Paulson and Crystal Christensen, were liable for
estate taxes under California state law. The district court
ruled in favor of defendants on the Tax Code claims, and in
favor of the United States on the state law claims.
Allen Paulson died with an estate valued at nearly $200
million, most of which was placed in a living trust. The
estate was distributed among Paulson’s heirs over the years.
When the estate filed its tax return, it also paid a portion of
its tax liability, and elected to pay the remaining balance in
installments with a fifteen-year plan under 26 U.S.C. § 6166.
After the estate missed some payments, the Internal Revenue
Service terminated the § 6166 election and issued a notice of
final determination under 26 U.S.C. § 7479. The IRS then
recorded notices of federal tax liens against the estate. In the
meantime, the various beneficiaries of the living trust settled
their disputes, after which they claimed that the living trust
had been “completely depleted.”
The United States filed an action against the
beneficiaries, seeking a judgment against the estate and
living trust for the outstanding balance of the estate’s tax
liability. The United States also sought judgment against the
individual defendants under 26 U.S.C. § 6324(a)(2),
31 U.S.C. § 3713, and state law. The district court concluded
that defendant Madeleine Pickens was not liable for the
unpaid estate taxes as a beneficiary of the living trust, and
UNITED STATES V. PAULSON 5
that the remaining defendants were not liable for estate taxes
as transferees or trustees because they were not in possession
of estate property at the time of Allen Paulson’s death.
The panel held that § 6324(a)(2) imposes personal
liability for unpaid estate taxes on the categories of persons
listed in the statute who have or receive estate property,
either on the date of the decedent’s death or at any time
thereafter (as opposed to only on the date of death), subject
to the applicable statute of limitations. The panel next held
that the defendants were within the categories of persons
listed in § 6324(a) when they had or received estate property,
and are thus liable for the unpaid estate taxes as trustees and
beneficiaries. The panel further held that each defendant’s
liability cannot exceed the value of the estate property at the
time of decedent’s death, or the value of that property at the
time they received or had it as trustees and beneficiaries. The
panel did not reach the state law claims, because its
conclusion on the federal tax claims resolved the matter.
Judge Ikuta dissented. Disagreeing with the majority’s
statutory interpretation, she explained that the taxpayers’
reading of the statute is more plausible, avoids an illogical
result (namely, that a person who receives estate property
years after the estate is settled could be held personally liable
for estate taxes that potentially exceed the current value of
the property received), and is a better indication of
Congress’s intent to impose such personal liability only on
the date of the decedent’s death.
6 UNITED STATES V. PAULSON
COUNSEL
Lauren E. Hume (argued), Joan I. Oppenheimer, and Ivan C.
Dale, Attorneys; David A. Hubbert, Acting Assistant
Attorney General; Tax Division, United States Department
of Justice; Washington, D.C.; Randy S. Grossman, Acting
United States Attorney; Office of the United States Attorney;
Washington, D.C.; for Plaintiff-Appellant/Cross-Appellee.
Glen A. Stankee (argued), Akerman LLP, Fort Lauderdale,
Florida; Katherine E. Giddings, Akerman LLP, Tallahassee,
Florida; Donald N. David, Akerman LLP, New York, New
York; Joshua R. Mandell, Akerman LLP, Los Angeles,
California; Lisa M. Coyle, Blank Rome LLP, New York,
New York; for Defendant-Appellee Madeleine Pickens.
John C. Maloney Jr. (argued), Zuber Lawler LLP, New
York, New York, for Defendants-Appellees/Cross-
Appellants Vikki E. Paulson and Crystal Christensen.
James D. Paulson, Woodland Hills, California, pro se
Defendant-Appellant.
UNITED STATES V. PAULSON 7
OPINION
BADE, Circuit Judge:
Allen Paulson died with an estate valued at nearly $200
million, with most of his assets placed in a living trust. But
years later more than $10 million in estate taxes, interest, and
penalties remained unpaid. The United States of America
(the United States or the government) sued several of
Paulson’s heirs—John Michael Paulson, James D. Paulson,
Vikki E. Paulson, Crystal Christensen, and Madeleine
Pickens—alleging that they controlled the trust, as trustees,
or received estate property, as transferees or beneficiaries,
and thus are personally liable for the estate taxes under
§ 6324(a)(2) of the Internal Revenue Code, 26 U.S.C.
§ 6324(a)(2). The United States also alleged that Vikki
Paulson and Crystal Christensen, as co-trustees of the living
trust, were liable for unpaid estate taxes under section 19001
of the California Probate Code.
As relevant to this appeal, the district court granted in
part Vikki Paulson’s Crystal Christensen’s, and Madeleine
Pickens’s motions to dismiss, concluding that they were not
liable for the estate taxes under § 6324(a)(2) as trustees,
transferees, or beneficiaries, and later ruled on several
motions for summary judgment. Based on the reasoning in
its order granting the motions to dismiss in part, the court
ruled in favor of Madeleine Pickens and James Paulson on
the United States’ remaining claims under § 6324(a)(2),
concluding that they were not personally liable for the estate
taxes. The court entered summary judgment in favor of the
United States on its claims under the California Probate
Code. The United States appeals the rulings in favor of the
defendants on the § 6324(a)(2) claims, and Vikki Paulson
8 UNITED STATES V. PAULSON
and Crystal Christensen cross-appeal the judgment holding
them liable for the unpaid estate taxes under section 19001. 1
We have jurisdiction over these appeals under 28 U.S.C. §
1291.
We hold that § 6324(a)(2) imposes personal liability for
unpaid estate taxes on the categories of persons listed in the
statute who have or receive estate property, either on the date
of the decedent’s death or at any time thereafter, subject to
the applicable statute of limitations. We further hold that the
defendants were within the categories of persons listed in
§ 6324(a) when they had or received estate property, and
thus are liable for the unpaid estate taxes as trustees and
beneficiaries. Therefore, we reverse the district court’s
judgment in favor of the defendants on the United States’
claims under § 6324(a)(2), and remand to the district court
with instructions to enter judgment in favor of the
government on these claims with any further proceedings
necessary to determine the amount of each defendant’s
liability for the unpaid taxes. Because our conclusion on the
federal tax claims arising from the Internal Revenue Code
resolves this matter, we do not reach the parties’ dispute over
the interpretation of the California Probate Code.
I
A
Allen Paulson died on July 19, 2000. He was survived
by his third wife Madeleine Pickens, three sons from a prior
1
The district court concluded that John Michael Paulson was liable for
the unpaid estate taxes as executor and trustee of the living trust, but
concluded that he had successfully discharged his liability for the estate
taxes under 26 U.S.C. § 2204. The United States does not dispute that
finding on appeal. Therefore, only its claims against James Paulson,
Vikki Paulson, Crystal Christensen, and Madeleine Pickens are at issue.
UNITED STATES V. PAULSON 9
marriage—Richard Paulson, James Paulson, and John
Michael Paulson—and several grandchildren, including
Crystal Christensen. Richard Paulson died after his father,
and Vikki Paulson is Richard Paulson’s widow. At the time
of Allen Paulson’s death, his gross estate was valued at
$193,434,344 for federal estate tax purposes. Nearly all his
assets, which included real estate, stocks, bonds, cash, and
receivables, were held in a living trust. 2 The living trust was
revocable during Allen Paulson’s lifetime and, according to
its terms, the trust was to pay any estate taxes.
When Allen Paulson died, his son John Michael Paulson
became a co-trustee of the living trust and was appointed co-
executor by the probate court. In October 2001, John
Michael Paulson became the sole executor of the estate, with
a different co-trustee. That same month, he filed an estate
tax return, or Form 706, with the Internal Revenue Service
(IRS). On October 23, 2001, the IRS received the estate’s
Form 706 estate tax return, which reported a total gross
estate of $187,729,626, a net taxable estate of $9,234,172,
and an estate tax liability of $4,459,051. The estate paid
$706,296 with the return and elected to defer the remaining
balance of $3,752,755 to be paid in installments with a
fifteen-year plan under 26 U.S.C. § 6166. 3 In November
2
The only asset that was not held by the living trust was an ownership
interest in a hotel and casino corporation, which is not relevant to these
appeals.
3
Under § 6166, an executor may pay a portion of the estate taxes in
installments when more than 35% of the estate’s value consists of
interest in a closely held business. 26 U.S.C. § 6166(a)(1), (3). This
election is limited to the portion of the estate taxes attributable to the
interest in a closely held business. Id. § 6166(a)(2). Section 6166 allows
the executor to make interest payments for five years and then pay the
taxes over ten years. Id. § 6166(a)(3), (f).
10 UNITED STATES V. PAULSON
2001, the IRS assessed the reported estate tax liability of
$4,459,051.
The IRS audited the estate tax return and asserted a
deficiency in the estate tax reported on the return, which the
estate challenged in Tax Court. In December 2005, the Tax
Court entered a stipulated decision and determined that the
estate owed an additional $6,669,477 in estate taxes. The
IRS assessed the additional liability in January 2006, and the
estate elected to pay this amount through the remaining §
6166 installments. John Michael Paulson, as executor, made
interest installment payments until his removal as Trustee in
2009, and he timely made the first estate tax and interest
payment in April 2007. He obtained a one-year extension,
until April 2009, to make the 2008 tax and interest payment.
But neither he nor anyone else made that payment or any of
the subsequent installment payments. 4
Meanwhile, various disputes arose between Madeleine
Pickens and Allen Paulson’s other heirs. In settlement of
those disputes, Madeleine Pickens received assets that the
government asserts were worth approximately $19 million,
including $750,000 in cash, two residences and the personal
property located at those residences, and an ownership
interest in the Del Mar Country Club. 5 Vikki Paulson and
Crystal Christensen assert that the assets Madeleine Pickens
received were worth over $42 million. Madeleine Pickens
does not state a value for the assets she received. In February
4
After the estate’s default in 2009, the successor co-trustees of the living
trust submitted two offers in compromise to the IRS, accompanied by
non-refundable partial payments that the IRS applied to the estate taxes.
5
Allen Paulson’s living trust included provisions listing these two
residences as gifts to Madeleine (Paulson) Pickens, which she would
receive if, among other conditions, she survived him by six months.
UNITED STATES V. PAULSON 11
2003, John Michael Paulson and the co-trustee transferred
these assets from the living trust to Madeleine Pickens, as
trustee of her personal living trust. Between 2003 and 2006,
John Michael Paulson distributed at least $7,261,887 in cash
from the living trust to other trust beneficiaries, including
$990,125 to Crystal Christensen. 6
In March 2009, the probate court removed John Michael
Paulson as trustee of the living trust for misconduct and
appointed Vikki Paulson and James Paulson as co-trustees.
The government asserts that, at that time, the trust contained
assets worth more than $13.7 million, which exceeded the
estate tax liability. Vikki Paulson and Crystal Christensen
claim that by this time the living trust was insolvent, with
$10.8 million in assets, but $28.3 million in liabilities,
including $9.6 million in federal tax liability.
In May 2010, because of the missed installment
payments, the IRS terminated the § 6166 election and issued
a notice of final determination under 26 U.S.C. § 7479. The
probate court removed James Paulson as co-trustee, and
Vikki Paulson, as sole trustee of the living trust, challenged
the IRS’s termination of the § 6166 election in the Tax Court.
In May 2011, the Tax Court sustained the IRS’s termination
of the estate’s installment payment election.
In February 2011, the probate court appointed Crystal
Christensen co-trustee of the living trust with Vikki Paulson.
At that time, according to the government, the living trust
6
In his living trust, Allen Paulson bequeathed $1.4 million to Crystal
(Paulson) Christensen to be held in trust until she reached the age of 18,
with provisions that allowed for the trustee’s discretionary distributions
of principal and set specific times (when Crystal Christensen turned 25,
30, and 35 years old) for mandatory disbursements and the termination
of the trust.
12 UNITED STATES V. PAULSON
held assets worth at least $8.8 million. In June and July
2011, the IRS recorded notices of federal tax liens against
the estate under 26 U.S.C. §§ 6321, 6322, and 6323. In the
meantime, between 2007 and 2013, various disputes arose
between John Michael Paulson, Vikki Paulson, Crystal
Christensen, James Paulson, and others with interests in the
living trust. In January 2013, they settled their disputes
through an agreement in which John Michael Paulson
received the living trust’s ownership interest in a jet project,
the estate’s casino ownership interest, and certain tax losses
in exchange for resigning as executor. Vikki Paulson and
Crystal Christensen assert that, by the time of this
agreement, the living trust was “completely depleted.” The
probate court adopted the settlement agreement.
B
In September 2015, the United States filed this action
against John Michael Paulson, Madeleine Pickens, James
Paulson, Vikki Paulson, and Crystal Christensen in their
individual and representative capacities. The complaint
sought a judgment against the estate and the living trust for
the outstanding balance of the 2006 estate tax liability, which
then exceeded $10 million, as well as judgments against the
individual defendants under § 6324(a)(2), 31 U.S.C. § 3713,
and California law.
James Paulson, Vikki Paulson, Crystal Christensen, and
Madeleine Pickens filed motions to dismiss and argued that
they were not personally liable for the estate taxes under §
6324(a)(2) as trustees, beneficiaries, or transferees of the
living trust. The district court denied James Paulson’s
motion to dismiss, and partially granted and partially denied
Madeleine Pickens’s, Vikki Paulson’s, and Crystal
Christensen’s motions to dismiss. The district court
UNITED STATES V. PAULSON 13
concluded that Madeleine Pickens was not liable for the
unpaid estate taxes as a beneficiary of the living trust
because she did not receive life insurance benefits. 7 The
district court further concluded that James Paulson, 8 Vikki
Paulson, and Crystal Christensen were not liable for the
unpaid estate taxes as transferees or trustees because they
were not in possession of estate property at the time of Allen
Paulson’s death. 9
II
These appeals raise questions of statutory interpretation,
which we review de novo. Mada-Luna v. Fitzpatrick, 813
F.2d 1006, 1011 (9th Cir. 1987).
III
Section 2001 of the Internal Revenue Code imposes a tax
on a decedent’s taxable estate, which the executor is required
to pay. 26 U.S.C. §§ 2001(a), 2002. Section 6324, in turn,
7
Madeleine Pickens also argued that she was not liable as trustee of her
personal trust, and the district court granted summary judgment to her on
this issue because she did not receive estate property until three years
after Allen Paulson’s death. The district court, however, did not
determine whether Madeleine Pickens could be a “trustee,” under §
6324(a)(2), based on her role as a trustee of her separate personal trust.
The government does not argue on appeal that Madeleine Pickens is
liable for the estate taxes in her role as trustee of her separate personal
trust. Therefore, we do not address this issue.
8
James Paulson did not appeal the district court’s orders.
9
Vikki Paulson and Crystal Christensen also argued that they were not
liable under California law. After discovery, the district court granted
summary judgment to the United States on its claims that Vikki Paulson
and Crystal Christensen, as successor trustees of the living trust, were
liable for the unpaid estate taxes under the California Probate Code. As
previously stated, we do not address this issue of California law.
14 UNITED STATES V. PAULSON
operates to protect the government’s ability to collect estate
and gift taxes. See 26 U.S.C. § 6324(a); see also United
States v. Vohland, 675 F.2d 1071, 1076 (9th Cir. 1982)
(“[Section] 6324 is structured to assure collection of the
estate tax.”). To this end, the statute imposes a lien on the
decedent’s gross estate for the unpaid estate taxes in
§ 6324(a)(1) and imposes personal liability for such taxes on
those who receive or have estate property in § 6324(a)(2). 10
26 U.S.C. § 6324(a)(1) and (2); see also United States v.
Geniviva, 16 F.3d 522, 524 (3d Cir. 1994) (explaining that §
6324(a)(2) “affords the Government a separate remedy
against the beneficiaries of an estate when the estate divests
itself of the assets necessary to satisfy its tax obligations”).
The statutory provision at issue here, § 6324(a)(2), as
stated in its title, imposes personal liability on “transferees
and others” who receive or have property from an estate.
The statute provides that:
If the estate tax imposed by chapter 11 is not
paid when due, then the spouse, transferee,
trustee (except the trustee of an employees’
10
These statutory tools to guard against the risk of non-payment, while
complementary, have some important differences. Section 6324(a)(1)
imposes “a lien upon the gross estate of the decedent for 10 years from
the date of death,” in the amount of the unpaid estate tax. 26 U.S.C. §
6324(a)(1). Unlike the general tax lien of §§ 6322 and 6323, the estate
tax lien arises before the tax is assessed and is valid against most third
parties even if notice of the lien is not recorded. See Detroit Bank v.
United States, 317 U.S. 329, 336–37 (1943); Vohland, 675 F.2d at 1074–
76. In contrast, § 6324(a)(2) imposes personal liability for unpaid estate
taxes, on those listed in the statute, for ten years after assessment, 26
U.S.C. § 6502(a)(1), and that collection period is tolled by a § 6166
election and other events. See 26 U.S.C. § 6503(a)(1), (d); see also id.§§ 6213(a), 6331(k)(1).
UNITED STATES V. PAULSON 15
trust which meets the requirements of section
401(a)), surviving tenant, person in
possession of the property by reason of the
exercise, nonexercise, or release of a power
of appointment, or beneficiary, who receives,
or has on the date of the decedent’s death,
property included in the gross estate under
sections 2034 to 2042, inclusive, to the extent
of the value, at the time of decedent’s death,
of such property, shall be personally liable
for such tax.
26 U.S.C. § 6324(a)(2) (emphasis added). The question
before us is whether the phrase “on the date of the decedent’s
death” modifies only the immediately preceding verb “has,”
or if it also modifies the more remote verb, “receives.”
The United States argues the limiting phrase “on the date
of decedent’s death” modifies only the immediately
preceding verb “has,” and not the more remote verb
“receives.” Therefore, in its view, the statute imposes
personal liability on those listed in the statute who (1)
receive estate property at any time on or after the date of the
decedent’s death, or (2) have estate property on the date of
the decedent’s death. Thus, it contends, § 6324(a)(2)
imposes personal liability for the unpaid estate taxes in this
case on successor trustees and beneficiaries of the living
trust, including those who have or received estate property
after the date of decedent Allen Paulson’s death.
The defendants, in contrast, argue that the limiting
phrase “on the date of the decedent’s death” modifies both
the immediately preceding verb “has,” and the more remote
verb “receives.” Thus, under their interpretation, the statute
imposes personal liability for the unpaid estate taxes only on
16 UNITED STATES V. PAULSON
those who receive or have property included in the gross
estate on the date of the decedent’s death. But those who
receive property from the estate at any point after the date of
the decedent’s death have no personal liability for the unpaid
estate taxes.
We conclude that the most natural reading of the
statutory text, and other indicia of its meaning, supports the
United States’ interpretation. Therefore, we hold that §
6324(a)(2) imposes personal liability for unpaid estate taxes
on the categories of persons listed in the statute who have or
receive estate property, either on the date of the decedent’s
death or at any time thereafter, subject to the applicable
statute of limitations.
A
“Statutory construction must begin with the language
employed by Congress and the assumption that the ordinary
meaning of that language accurately expresses the legislative
purpose.” Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt.
Dist., 541 U.S. 246, 252 (2004) (internal quotation marks
omitted) (quoting Park ‘N Fly, Inc., v. Dollar Park & Fly,
Inc., 469 U.S. 189, 194 (1985)); see also, e.g., Facebook,
Inc. v. Duguid, 141 S. Ct. 1163, 1169 (2021) (explaining that
when interpreting a statute, “[w]e begin with the text.”);
United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241
(1989) (“The task of resolving the dispute over the meaning
of [a statute] begins where all such inquiries must begin:
with the language of the statute itself.”).
Here, the statutory text at issue states that a person (who
fits within a category listed in the statute) “who receives, or
has on the date of the decedent’s death, property included in
the gross estate . . . shall be personally liable” for the unpaid
estate tax. 26 U.S.C. § 6324(a)(2) (emphasis added). Thus,
UNITED STATES V. PAULSON 17
in the disputed text the statute lists two verbs: “receives” and
“has.” Id. These two verbs are in separate independent
clauses, set off from each other by a comma and the
conjunction “or.” See id. In addition, the first verb
“receives” is set off from the limiting phrase (“on the date of
the decedent’s death”) by a comma. A term or phrase “set
aside by commas” and “separated . . . by [a] conjunctive
word[]” from a limiting clause “stands independent of the
language that follows.” Ron Pair Enters., 489 U.S. at 241. 11
Thus, the structure of § 6324(a)(2) supports the conclusion
that “receives” stands independent of the language that
follows, “on the date of the decedent’s death.” Therefore,
this limiting phrase does not modify the remote verb
“receives.” See id.
This reading of the statute is supported by the canon of
statutory construction known as “the rule of the last
antecedent.” The Supreme Court has long applied this
“timeworn textual canon” to interpret “statutes that include
a list of terms or phrases followed by a limiting clause,”
11
In Ron Pair Enterprises, the Court considered whether § 506(b) of the
Bankruptcy Code, 11 U.S.C. § 506(b), allowed the holder of an over-
secured claim to recover, in addition to “interest on such claim,” fees,
costs, or other charges. 489 U.S. at 241. The statute provided that
“[t]here shall be allowed to the holder of such claim, interest on such
claim, and any reasonable fees, costs or charges provided for under the
agreement under which such claim arose.” Id. (quoting 11 U.S.C.
§ 506(b)). The Court explained that “[t]he phrase ‘interest on such
claim’ is set aside by commas, and . . . stands independent of the
language that follows.” Id. Therefore, it is not “joined to the following
clause so that the final ‘provided for under the agreement’ modifies it as
well.” Id. at 242. The Court therefore concluded that “[b]y the plain
language of the statute, the two types of recovery [(1) “interest on such
claim,” and (2) “reasonable fees, costs or charges provided for under the
agreement”] are distinct.” Id.18 UNITED STATES V. PAULSON
Lockhart v. United States, 577 U.S. 347, 351 (2016). The
“rule of the last antecedent” provides that “a limiting clause
or phrase . . . should ordinarily be read as modifying only the
noun or phrase that it immediately follows.” 12 Id. (alteration
in original) (quoting Barnhart v. Thomas, 540 U.S. 20, 26
(2003)); see also id. (“[Q]ualifying words or phrases modify
the words or phrases immediately preceding them and not
words or phrases more remote, unless the extension is
necessary from the context or the spirit of the entire writing.”
(alteration in original) (quoting BLACK’S LAW DICTIONARY
1532–33 (10th ed. 2014))). The rule of the last antecedent
supports the conclusion that the limiting phrase “on the date
of the decedent’s death” modifies only the immediately
preceding antecedent “has,” and not the more remote
antecedent “receives.”
Vikki Paulson and Crystal Christensen, however, argue
that we should apply the series-qualifier canon and conclude
that the limiting phrase “on the date of the decedent’s death”
modifies both the immediately preceding verb “has,” and the
more remote verb, “receives.” The series-qualifier canon
provides that “‘[w]hen there is a straight-forward, parallel
construction that involves all nouns or verbs in a series,’ a
modifier at the end of the list ‘normally applies to the entire
12
In Lockhart, the Court applied the rule of the last antecedent to
interpret 18 U.S.C. § 2252(b)(2), which increases the sentences of
defendants if they have “a prior conviction . . . under the laws of any
State relating to aggravated sexual abuse, sexual abuse, or abusive sexual
conduct involving a minor or ward.” 577 U.S. at 350–52 (quoting 18
U.S.C. § 2252(b)(2)). The Court concluded that the limiting phrase
“involving a minor or ward” modified only the immediately preceding
crime in the list of offenses, “abusive sexual conduct,” and did not
modify the other listed crimes, “aggravated sexual abuse,” or “abusive
sexual conduct.” Id. at 349.
UNITED STATES V. PAULSON 19
series.’” Facebook, 141 S. Ct. at 1169 (alteration in original)
(quoting ANTONIN SCALIA & BRYAN A. GARNER, READING
LAW: THE INTERPRETATION OF LEGAL TEXTS 147 (2012)).
In Facebook, the Court interpreted the Telephone
Consumer Protection Act of 1991, 47 U.S.C. § 227(a)(1),
and concluded that the series-qualifier canon suggested the
most natural reading of the statute. 13 141 S. Ct. at 1169–70
& n.5. The Court focused on the statute’s syntax and
punctuation, explaining that because the limiting phrase at
issue (“using a random or sequential number generator”)
immediately followed an integrated clause that contained the
antecedents (“store or produce telephone numbers to be
called”), and the limiting phrase was separated from the
antecedents by a comma, the limiting phrase applied to all
the antecedents, not just the immediately preceding one. Id.
at 1170; cf. United States v. Pritchett, 470 F.2d 455, 459
(D.C. Cir. 1972) (applying rule of the last antecedent and
explaining that if the limiting phrase were intended to apply
to all categories of persons listed in the statute, the drafters
would have included a comma “so as to separate it from the
clause immediately preceding”). The Court also explained
that applying the series-qualifier canon did not conflict with
“the rule of the last antecedent,” which does not apply when
a limiting phrase follows an integrated clause. Facebook,
141 S. Ct. at 1170.
Here, however, the limiting phrase in § 6324(a)(2), “on
the date of the decedent’s death,” is not separated from both
antecedents by a comma, and it does not follow an integrated
13
The statute at issue in Facebook, § 227(a)(1), defined an “automatic
telephone dialing system” as “equipment with the capacity both to store
or produce telephone numbers to be called, using a random or sequential
number generator.” 141 S. Ct. at 1167 (quoting 47 U.S.C. § 227(a)(1)).
20 UNITED STATES V. PAULSON
clause that contains both antecedents. Instead, the limiting
phrase is set off by commas with the immediate antecedent,
“has,” from the rest of the sentence (“who receives, or has
on the date of the decedent’s death, property included in the
gross estate”). 26 U.S.C. § 6324(a)(2). Thus, the
punctuation of § 6324(a)(2) does not support a reading that
applies the limiting phrase to both the immediate and remote
antecedents.
Moreover, accepting the defendants’ interpretation
would require us to read the statute as if it were punctuated
differently—to essentially rewrite the statute. Specifically,
we would either need to read the statute as if the two verbs
“receives” and “has” appeared together in an integrated
clause and were separated from the limiting phrase by a
comma (i.e., a person who receives or has, on the date of the
decedent’s death, property included in the gross estate is
liable for the unpaid estate taxes) or as if the statute included
an additional comma that separated the limiting phrase from
the antecedents (i.e., a person, who receives, or has, on the
date of the decedent’s death, property included in the gross
estate is liable for the unpaid estate taxes). Cf. In re
Bateman, 515 F.3d 272, 277 (4th Cir. 2008) (reading a
provision in the bankruptcy code so that “[n]o punctuation
needs to be added or deleted” (internal quotation marks and
citation omitted)). But Congress did not structure the statute
this way. See Int’l Primate Prot. League v. Adm’rs of Tulane
Educ. Fund, 500 U.S. 72, 79–80 (1991) (explaining that
Congress would have added a comma if it had intended a
meaning other than the natural reading); 14 see also In re
14
In International Primate Protection League, the Court construed 28
U.S.C. § 1442(a)(1) and concluded that the statute’s punctuation
UNITED STATES V. PAULSON 21
Sanders, 551 F.3d 397, 400 (6th Cir. 2008) (“Congress no
doubt could have worked around [the rule of the last
antecedent] had it wished . . . .”).
We therefore conclude that the rule of the last antecedent
is the canon of interpretation that is most consistent with the
text, structure, and punctuation of § 6324(a)(2), and
therefore it is the appropriate tool to interpret the statute.
B
This conclusion, however, does not end our inquiry. As
the Court has explained, canons of statutory interpretation
are not absolute and can be “overcome by other indicia of
meaning.” Lockhart, 577 U.S. at 352 (citations omitted); see
also Facebook, 141 S. Ct. at 1170 n.5 (“Linguistic canons
are tools of statutory interpretation whose usefulness
depends on the particular statutory text and context at
issue.”). Here, however, applying the rule of the last
antecedent results in an interpretation of § 6324(a)(2) that is
supported by the statutory text and context, while applying
the series-qualifier canon does not.
This is so because we are also bound by the canon that
requires us to “strive to ‘giv[e] effect to each word and
mak[e] every effort not to interpret a provision in a manner
supported the conclusion that the phrase “Any officer of the United
States or any agency thereof, or person acting under him,” did not permit
agencies to remove civil suits from state to federal court. 500 U.S. at79–80. As the Court explained, “[i]f the drafters of § 1442(a)(1) had
intended the phrase ‘or any agency thereof’ to describe a separate
category of entities endowed with removal power, they would have
likely employed the comma consistently.” Id. at 80. Thus, the Court
concluded that “[a]bsent the comma, the natural reading of the clause is
that it permits removal by anyone who is an ‘officer’ either ‘of the United
States’ or of one of its agencies.” Id.
22 UNITED STATES V. PAULSON
that renders other provisions of the same statute inconsistent,
meaningless or superfluous.’” R.J. Reynolds Tobacco Co. v.
County of Los Angeles, 29 F.4th 542, 553 (9th Cir. 2022)
(alterations in original) (quoting Shelby v. Bartlett, 391 F.3d
1061, 1064 (9th Cir. 2004)). The defendants’ narrow
interpretation of § 6324(a)(2), which limits personal liability
for unpaid estate taxes to those who have or receive estate
property on the date of the decedent’s death only, violates
this canon because it conflicts with the plain meaning of the
very next clause of the statute.
That clause applies § 6324(a)(2) to “property included in
the gross estate under sections 2034 to 2042, inclusive.”
These sections, in turn, attach personal liability for the
unpaid estate taxes on the gross estate to assets that are
receivable. See 26 U.S.C. § 2039(a) (incorporating “annuity
or other payments receivable” into the gross estate); id.§ 2041(a)(2) (incorporating property that a transferee may
not receive by a power of appointment until after “notice”
and the “expiration of a stated period”); id. § 2042
(incorporating life insurance proceeds “[t]o the extent of the
amount receivable”). Thus, the statute clearly anticipates
that at the time of the decedent’s death, the categories of
persons listed in the statute may receive the expectation of
the right to receive certain estate property. Id. § 6324(a)(2).
In other words, they may have a “receivable interest” on the
date of the decedent’s death but not actually receive property
on that date. See Receivable, BLACK’S LAW DICTIONARY
(11th ed. 2019) (defining “receivable” as “[a]waiting receipt
of payment” or “[s]ubject to a call for payment”). Under the
plain language of § 6324(a)(2), those who fit within the
categories of persons listed in the statute are personally
liable for the estate taxes on such property.
UNITED STATES V. PAULSON 23
The statute also explicitly applies to those who already
have or possess estate property on the date of the decedent’s
death, such as a “surviving tenant” or a “person in possession
of the property.” 26 U.S.C. § 6324(a)(2); see id.(incorporating § 2040, which includes in the gross estate
property that is held by the decedent and any other person
“as joint tenants with the right of survivorship”); see also
United States v. Craft, 535 U.S. 274, 280–81 (2002)
(explaining that certain tenancies enjoy the “right of
survivorship,” which is a “right of automatic inheritance”
such that “[u]pon the death of one joint tenant, that tenant’s
share in the property does not pass through will or the rules
of intestate succession; rather, the remaining tenant or
tenants automatically inherit it”); Survivorship Tenancy,
BLACK’S LAW DICTIONARY (11th ed. 2019) (defining
“survivorship tenancy” as “a tenancy in which the surviving
tenant automatically acquires ownership of a deceased
tenant’s share”).
Thus, the context and structure of the statute provide
additional indicia of its meaning and further clarify that
personal liability for the estate tax applies to those who
receive estate property, on or after the date of the decedent’s
death (i.e., through annuities, other receivable payments,
powers of appointment, or insurance policies), and to those
who have estate property on the date of the decedent’s death
(e.g., through a survivorship tenancy).
Vikki Paulson and Crystal Christensen acknowledge that
§ 6324(a)(2)’s definition of the “gross estate” includes
property that the categories of persons listed in the statute
will receive after the date of the decedent’s death, for
example property received through the power of
appointment described in § 2041. But they argue that the
phrase “on the date of the decedent’s death” must be read “to
24 UNITED STATES V. PAULSON
exclude certain assets that are part of the gross estate from
the categories of assets that trigger personal liability.” Thus,
even though the statute explicitly incorporates “sections
2034 to 2042, inclusive” to define the “property included in
the gross estate,” 26 U.S.C. § 6324(a)(2), the defendants
argue that we should nonetheless conclude that the receipt of
such property does not subject the recipient to personal
liability for unpaid estate taxes. They argue that because
such property will not be received until after the date of the
decedent’s death, the recipient “does not have ‘on the date
of the decedent’s death’ an asset out of which that person can
pay taxes, and so is not personally liable.” Thus, they
conclude that “some assets included in the gross estate
would not trigger liability under [§] 6324(a)(2).”
But the statute does not state that liability for unpaid
estate taxes attaches only to those who can pay the taxes on
the date of the decedent’s death. Instead, the statute imposes
personal liability for the unpaid estate taxes based on the
receipt or possession of property from the gross estate. See
26 U.S.C. § 6324(a)(2). And the tax code and regulations do
not otherwise suggest that liability for estate taxes is related
to the ability to pay the taxes on the date of the decedent’s
death, but instead they provide for the collection of taxes
after assessment and allow for extensions of time and
installment payments. See 26 U.S.C. §§ 6161, 6166, 6502,
and 26 C.F.R. § 20.6166A-3. Therefore, we find no support
in the text of the statute for the defendants’ argument.
Madeleine Pickens, on the other hand, argues that “[§§]
2039 and 2042 do not bring within the gross estate insurance
proceeds and annuity payments received on the date of
death, but rather insurance payments and annuity payments
receivable on the date of the decedent’s death.” Although
she acknowledges that these payments are receivable at the
UNITED STATES V. PAULSON 25
decedent’s death and “may not actually be paid until some
later point,” she maintains “[i]t is that receivable”—the
receivable available at the decedent’s death—“that is
brought within the gross estate by [§§] 2039 and 2042.” But
the statute does not impose personal liability on those who
“receive a receivable” on the date of the decedent’s death.
See 26 U.S.C. § 6324(a)(2). Instead, the natural reading of
the statute is that it defines the gross estate to include
property that will be received after the date of the decedent’s
death, regardless of whether it is receivable on that date.
Madeleine Pickens also argues that the statute’s
incorporation of § 2041(a)(2), which brings within the gross
estate property subject to a power of appointment that may
not take effect until after the decedent’s death, does not mean
that the statute imposes liability on those who receive such
property after the date of the decedent’s death. This is so,
she reasons, because § 2041(a)(2) states that such property
shall be considered to exist on the date of the decedent’s
death. But she does not explain why personal liability under
§ 6324(a)(2) turns on whether property is deemed to exist on
the date of the decedent’s death. 15 The statute nowhere
15
Section 2041(a)(2) provides that the gross estate shall include “any
property with respect to which the decedent has at the time of his death
a general power of appointment.” It further states that:
the power of appointment shall be considered to exist
on the date of the decedent’s death even though the
exercise of the power is subject to a precedent giving
of notice or even though the exercise of the power
takes effect only on the expiration of a stated period
after its exercise, whether or not on or before the date
of the decedent’s death notice has been given or the
power has been exercised.
26 UNITED STATES V. PAULSON
includes this distinction. Instead, the statute explicitly
applies to property that trustees, transferees, beneficiaries,
and others listed in the statute have or receive. Property that
exists on the date of the decedent’s death, including property
within the scope of § 2041(a)(1), may be received after the
date of the decedent’s death, and receiving such property
subjects the recipient to personal liability for unpaid estate
taxes.
Therefore, we conclude that the context and structure of
§ 6324(a)(2) provide additional indicia of its meaning—
which supports the conclusion that the statute imposes
personal liability for unpaid estate taxes on the categories of
persons listed the statute who (1) receive estate property on
or after the date of the decedent’s death, or (2) have estate
property on the date of the decedents’ death—and
defendants have not refuted these indicia of the statute’s
meaning.
C
Vikki Paulson and Crystal Christensen also argue that
applying the rule of the last antecedent to interpret the
statute, as in the government’s proposed “overly broad
interpretation,” would result in “two absurd situations.”
First, they argue that if § 6324(a)(2) is construed to impose
personal liability on those listed in the statute who receive
property from the gross estate after the date of the decedent’s
death, then the government could impose personal liability
for unpaid estate taxes on purchasers of estate assets. They
base this argument on the definition of a “transferee” as any
26 U.S.C. § 2041(a)(2). Thus, by its plain terms, this provision clarifies
that property subject to a power of appointment is included in the gross
estate, even if the power of appointment is exercised after the decedent’s
death.
UNITED STATES V. PAULSON 27
person to whom a property interest is conveyed, which, in
their view, includes “purchasers.” Second, they argue that
because the estate property is valued “at the time of the
decedent’s death,” if the property later depreciates, those
who receive estate property after the date of the decedent’s
death could be personally liable for estate taxes that exceed
the value of the property they received.
Although not expressly stated in their briefing, it appears
these defendants are impliedly invoking the canon against
absurdity. See United States v. Middleton, 231 F.3d 1207,
1210 (9th Cir. 2000) (explaining that a court should avoid an
interpretation of a statute that would produce “an absurd and
unjust result which Congress could not have intended”)
(quoting Clinton v. City of New York, 524 U.S. 417, 429
(1998)). The defendants, however, fail to address long-
standing Supreme Court and Ninth Circuit case law that
strictly limits the circumstances in which the absurdity canon
may apply. See, e.g., Crooks v. Harrelson, 282 U.S. 55, 60
(1930) (explaining that the absurdity doctrine is applied
“only under rare and exceptional circumstances,” and that
“the absurdity must be so gross as to shock the general moral
or common sense”); see also id. (explaining that the
application of the absurdity doctrine “so nearly approaches
the boundary between the exercise of the judicial power and
that of the legislative power as to call rather for great caution
and circumspection in order to avoid usurpation of the
latter.). 16
16
See also Public Citizen v. U.S. Dep’t of Just., 491 U.S. 440, 470–71
(1989) (Kennedy, J., concurring) (citing Church of the Holy Trinity v.
United States, 143, U.S. 457, 459 (1892)) (explaining that courts may
invoke the absurdity canon only when statutory language leads to
28 UNITED STATES V. PAULSON
As the Court explained in Crooks, Congress may enact
legislation that “turn[s] out to be mischievous, absurd, or
otherwise objectionable. But in such case the remedy lies
with the lawmaking authority, and not with the courts.” Id.(citations omitted); see also Griffin v. Oceanic Contractors,
Inc., 458 U.S. 564, 571, 574–75 (1982) (concluding that an
interpretation of federal maritime statute that resulted in
$300,000 award to seaman for back wages penalty, when he
had incurred only $412 in unpaid wages, did not present an
“exceptional case” that allowed court to apply the absurdity
doctrine); see also id. at 576 (“The remedy for any
dissatisfaction with the results in particular cases lies with
Congress and not with this Court. Congress may amend the
statute; we may not.”).
As we explain next, without even reaching the absurdity
canon, the defendants’ first argument—suggesting tax
liability could be applied to bona fide purchasers of estate
assets—fails based on the plain language of § 6324(a)(2) and
other provisions of the tax code. The second argument fails
because, even considering the absurdity canon, the result that
defendants posit—that estate property could depreciate and
result in tax liability that exceeds the property’s value—does
not meet the high bar for showing absurdity. See United
States v. Lopez, 998 F.3d 431, 438–39 (9th Cir. 2021)
(explaining that “the absurdity canon is ‘confined to
situations where it is quite impossible that Congress could
“patently absurd” results, such as shown by the “few examples of true
absurdity . . . given in the Holy Trinity decision,” of prosecuting a sheriff
for obstruction of the mail when he was executing a warrant to arrest a
mail carrier for murder, or applying “a medieval law against drawing
blood in the streets” to a physician treating “a man who had fallen down
in a fit”).
UNITED STATES V. PAULSON 29
have intended the result’”) (quoting In re Hokulani Square,
Inc., 776 F.3d 1083, 1088 (9th Cir. 2015)).
1
The defendants’ first argument fails because §
6324(a)(2) does not impose liability on “purchasers.”
Instead, it imposes liability for the unpaid estate taxes on the
following six categories of persons listed in the statute: a
“spouse, transferee, trustee . . . , surviving tenant, person in
possession of the property by reason of the exercise . . . of a
power of appointment, or beneficiary.” 26 U.S.C.
§ 6324(a)(2). The tax code, in § 6324(a)(2) and elsewhere,
distinguishes purchasers from others who receive estate
property. See id. §§ 2037(a), 2038(a), (b), 6323(a), and
6324(a)(2), (3). Indeed, §§ 2037 and 2038 exempt from a
decedent’s gross estate any property that was transferred to
a bona fide purchaser for adequate and full consideration. Id.
§§ 2037(a), 2038(a), (b). And § 6324(a)(2) provides that a
transfer of estate property “to a purchaser or holder of a
security interest” divests the transferred property of the
special estate lien in § 6324(a)(1). 17
17
We have previously explained, in the context of the special estate tax
lien, that § 6324 “provides purchasers considerable, though not
complete, protection.” Vohland, 675 F.2d at 1075 (footnote omitted).
We further explained that:
Upon transfer of non-probate property to a purchaser,
the property is divested of the lien, so that a purchaser
of such property is fully protected. [26 U.S.C.]
§ 6324(a)(2). Property that was part of the ‘probate’
estate, i.e., [§] 2033 property, is divested of the lien
when it is transferred to a subsequent purchaser, but
30 UNITED STATES V. PAULSON
Moreover, the tax code provides different definitions for
“transferees” and “purchasers.” In § 6901, it defines a
“transferee” as a “donee, heir, legatee, devisee, and
distributee, and with respect to estate taxes, also includes any
person who, under [§] 6324(a)(2), is personally liable for any
part of such tax.” Id. § 6901(h). Notably, while this
definition includes the categories of persons listed in
§ 6324(a)(2), it does not include a “purchaser.”
In § 6323, the tax code defines a “purchaser” as “a
person who, for adequate and full consideration in money or
money’s worth, acquires an interest (other than a lien or
security interest) in property which is valid under local law
against subsequent purchasers without actual notice.” 26
U.S.C. § 6323(h)(6). This definition requires more than the
mere transfer or receipt of property; it requires adequate and
full consideration to support the purchase. Therefore, for
purposes of the tax code, the definition of transferee does not
include a purchaser and the defendants’ argument fails. 18
only if the estate’s executor has been discharged from
personal liability pursuant to [§] 2204.
Id. (footnote omitted) (citing 26 U.S.C. § 6324(a)(2), (3)). Moreover,
there are means for a purchaser of probate property to avoid risks of loss
“either by establishing that the executor or administrator has been
released under [§] 2204 or by securing a certificate of discharge of the
lien under [§] 6325(c).” Id. at 1076 (citation omitted).
18
Moreover, defendants’ interpretation of a “transferee” who receives
estate property after the date of the decedent’s death as including a
“purchaser” is not consistent with statute’s purpose of ensuring the
collection of taxes, Vohland, 675 F.2d at 1076, because the transfer of
property from the gross estate to a purchaser for “adequate and full
consideration in money,” 26 U.S.C. § 6323, does not divest the estate “of
the assets necessary to satisfy its tax obligations,” Geniviva, 16 F.3d at
524.
UNITED STATES V. PAULSON 31
2
a
The defendants’ second argument also fails. The
defendants correctly state that the statutory language
imposes estate tax liability “to the extent of the value, at the
time of the decedent’s death, of such property.” Id.§ 6324(a)(2). The modifier “at the time of the decedent’s
death” applies to “the extent of the value.” Id. This language
plainly means that tax liability is calculated based on the
value of the estate property at the time of decedent’s death.
Id. As the government acknowledges, this provision favors
the taxpayer by limiting liability for any unpaid estate taxes
to the value of the property at the time of the decedent’s
death, even if the property increases in value after the
decedent’s death. 19 See id. Thus, the statutory language
anticipates, and allows, a potential windfall for a person who
receives estate property that increases in value after the date
of the decedent’s death.
The defendants, however, dispute that Congress could
have also anticipated that estate property could depreciate
after the date of the decedent’s death and thus potentially
result in tax liability for the recipient that exceeds the
property’s value. 20 The defendants argue that an
19
In its briefing, the government stated that the “property is valued ‘at
the time of the decedent’s death,’” and that “language simply caps
potential liability under § 6324(a)(2) by preventing liability from
exceeding the value of the non-probate property at the time of the
decedent’s death.”
20
If, as the defendants suggest, estate property continued to depreciate
after the transferee or other beneficiary accepted it, such that the tax
liability eventually exceeded the value of the property received, that risk
32 UNITED STATES V. PAULSON
interpretation of § 6324(a)(2) that would allow the
government to impose personal liability for the estate taxes
“for a greater amount of money than they ever held,” would
lead to “a nonsensical result.” 21 But “[t]o avoid absurdity,
the plain text of Congress’s statute need only produce
‘rational’ results, not ‘wise’ results.” Lopez, 998 F.3d at 438
(citing Hokulani Square, 776 F.3d at 1088). Thus, a statute’s
text may lead to results that are “not wise,” and that we may
even consider “harsh and misguided,” but a statute is not
absurd if “it is at least rational.” Hokulani Square, 776 F.3d
at 1088 (rejecting the argument that bankruptcy code
provision was absurd because whether trustee received a fee
for his services or worked for free turned on trivialities).
And “the bar for ‘rational’ is quite low.” Lopez, 998 F.3d at
438 (citing Griffin, 458 U.S. at 575–76).
This is not a situation where it is “quite impossible” that
Congress could have intended the result. See Lopez, 998
F.3d at 438 (citation omitted). Here, Congress clearly could
have anticipated that the value of estate property could
change after the date of the decedent’s death—either by
increasing or decreasing in value—and thus could have
of loss would apply equally to those who receive estate property on the
date of the decedent’s death and to those who receive estate property
after the date of the decedent’s death. There is nothing about the risk of
accepting property that may decline in value that would apply unfairly
to those who receive such property after the date of the decedent’s death.
21
The hypotheticals defendants assert to support their arguments are
speculative and are not supported by the record. For example, they argue
that the value of the estate assets here “almost certainly” declined
because the estate included “uniquely depreciative horses in the Trust’s
possession.” But this argument does not account for the living trust
provisions mandating that “upon the [decedent’s] death” the trustee
“shall sell promptly the entire interest of the trust” in certain assets,
including “all horses.”
UNITED STATES V. PAULSON 33
anticipated that the value of some estate assets could
depreciate below the amount of the estate tax liability.
Indeed, as discussed more fully below, Congress included
several provisions in the tax code that mitigate the risk that
a transferee’s, beneficiary’s, or other person’s tax liability
could exceed the value of the property they received,
including: 26 U.S.C. § 2001 (tax rate based on a percentage
of the taxable estate), 22 § 2002, 26 C.F.R. § 20.2002-1(executor’s duty to pay the estate tax before distributing
estate property and liability for failing to do so), § 2518
(disclaimer), and § 6502(a)(1) (statute of limitations).
And while it is “not our job to find reasons for what
Congress has plainly done,” Lopez, 998 F.3d at 447 (M.
Smith, J., concurring) (internal quotation marks and citation
omitted), Congress rationally could have concluded that
such risk is acceptable or is effectively mitigated by other
provisions of the tax code, and thus is outweighed by the
benefit of ensuring the collection of estate taxes. This is not
an irrational tax policy. Indeed, we have previously
recognized that “[§] 6324 is structured to assure collection
of the estate tax.” Vohland, 675 F.2d at 1076. Moreover,
even if it were to conclude that such a policy is “odd,” or
“not wise,” Lopez, 998 F.3d at 447 (M. Smith, J., concurring)
(citation omitted), or simply unfair, we cannot rewrite the
statute to advance a different policy, id. at 440 (majority
opinion). See also Hokulani Square, 776 F.3d at 1088 (“The
absurdity canon isn’t a license for us to disregard statutory
text where it conflicts with our policy preferences . . . .”).
And if Congress determines that its tax policy leads to
22
The taxable estate is determined by deducting from the value of the
gross estate the deductions provided in Title 26, Part IV. 26 U.S.C.
§ 2051.
34 UNITED STATES V. PAULSON
unintended or unfair results, it is for Congress, not the courts,
to rewrite the tax code. See Crooks, 282 U.S. at 60; Griffin,
458 U.S. at 576. Therefore, we conclude that applying the
rule of the last antecedent to § 6324(a)(2) does not result in
an absurd interpretation of the statute.
b
But our conclusion—that this is not the “exceptional”
case where we can invoke the absurdity canon to reject the
interpretation of a statute that is most consistent with its text,
structure, punctuation, and other indicia of meaning—does
not mean that the defendants’ “the sky is falling” 23
arguments are based on anything other than remote
hypotheticals. And even if the defendants could demonstrate
that applying § 6324(a)(2) to those who receive estate
property after the date of the decedent’s death could result in
what they characterize as an “absurd situation,” that situation
will not arise here. 24
23
“Chicken Little,” Merriam-Webster.com Dictionary,
https://www.merriam-webster.com/dictionary, last visited May 10,
2023.
24
When Madeleine Pickens received assets from the estate, including
two residences, personal property, and cash, the value of those assets
exceeded the estate tax liability. Indeed, the government asserts that
when Madeleine Pickens received this property it was worth $19 million,
and Vikki Paulson and Crystal Christensen assert it was worth $42
million. Madeleine Pickens does not dispute these valuations. Crystal
Christensen received a non-depreciating bequest of cash, and the trustee
distributed $990,125 to her. And even if Vikki Paulson and Crystal
Christensen can establish that the estate’s tax liability exceeded the value
of the estate assets when they became trustees, they cannot establish that
it is absurd or unfair to impose tax liability on successor trustees because,
as the terms of the living trust make clear, trustees serve only if they are
“willing.”
UNITED STATES V. PAULSON 35
As an initial matter, before those who receive estate
property could be subjected to tax liability that exceeds the
value of the property they received, all the following events,
some of which are remote and unlikely, must occur.
First, the property must have depreciated after the date
of the decedent’s death to the point that it is worth less than
the tax liability, which is calculated as a percentage of the
amount of the taxable estate. 25 See 26 U.S.C. § 2001 (setting
rate schedule of 18% to 40%, depending on the amount of
the taxable estate).
Second, the executor must have failed to pay the estate
tax before distributing estate property. See 26 U.S.C. §§
2001(a), 2002; id. § 6324(a)(2) (imposing personal liability
on transferee and others when “estate tax imposed by chapter
11 is not paid when due”); 26 C.F.R. § 20.2002-1 (imposing
personal liability on executor for distributing any portion of
the estate before all estate tax is paid).
Third, the estate must have “divest[ed] itself of the assets
necessary to satisfy its tax obligations,” Geniviva, 16 F.3d at
524, thus defeating the lien for estate taxes under that would
apply under § 6324(a)(1).
Fourth, the statute of limitations must not have expired
by the time the property is distributed or the government
attempts collection. See 26 U.S.C. § 6502(a)(1).
25
For example, in this case, at the time of Allen Paulson’s death,
although his estate reported a gross taxable estate of $187,729,626, his
net taxable estate was reported at a substantially lower amount,
$9,234,172, and the tax liability was initially reported as $4,459,051.
After the IRS successfully asserted a deficiency, the Tax Court
determined that the estate owed an additional $6,669,477 in estate taxes.
Thus, the tax liability was a fraction of the gross taxable estate.
36 UNITED STATES V. PAULSON
Fifth, a transferee, beneficiary, or other recipient of the
estate property must not have disclaimed or refused the
property. See 26 U.S.C. § 2518; 26 C.F.R. § 25.2518-2. 26
Sixth, the government must successfully seek to impose
tax liability on a transferee, beneficiary, or other recipient of
estate property in an amount that exceeds the value of the
property they received.
Focusing on the final factor—whether the government
would later seek to impose tax liability that exceeds the value
of the property received and would be successful in
advancing that argument—we rely on the government’s
avowals in its briefing and at oral argument that estate tax
liability cannot exceed the value of the property received.
Specifically, the government asserted in its briefing that the
language in § 6324(a)(2) that the estate property is valued at
the time of the decedent’s death, “does not expose a person
to liability that exceeds the value of the property that he or
she personally had or received.” The government further
emphasized this point, explaining that: “[i]nstead, a person
will be liable under § 6324(a)(2) only to the extent that he or
she actually ‘receives’ or ‘has’ non-probate property, viz.,
26
A disclaimer must be in writing, made within nine months of the
transfer creating the interest or when the recipient reaches age 21,
whichever is later, and before the transferee accepts any of the interest
or its benefits. 26 U.S.C. § 2518(b). The regulations further explain that
the nine-month period for making a disclaimer “generally is to be
determined with reference to the transfer creating the interest in the
disclaimant.” 26 C.F.R. § 25.2518-2(c)(3)(i). For transfers made by a
decedent at death, the transfer creating the interest occurs on the date of
the decedent’s death. Id.UNITED STATES V. PAULSON 37
the person’s liability is capped at the value of the property
had or received.” 27
These representations, coupled with the doctrine of
judicial estoppel, provide additional safeguards against the
hypothetically unfair application of personal liability under
§ 6324(a)(2), which the defendants posit. Although the
application of judicial estoppel is discretionary, it could be
applied to bar the government from later arguing, in this case
or a future case, that it can recover more than the value of
the property that the taxpayer received. 28 See New
Hampshire v. Maine, 532 U.S. 742, 750 (2001) (explaining
that judicial estoppel “is an equitable doctrine invoked by a
court at its discretion” (internal quotation marks and citation
omitted)). The doctrine exists to “to protect the integrity of
the judicial process by prohibiting parties from deliberately
changing positions according to the exigencies of the
27
To support its position, the government cites United States v. Marshall,
798 F.3d 296, 315 (5th Cir. 2015) (holding that a donee’s personal
liability for gift tax under § 6324(b) “is capped by the amount of the
gift”). Although the language of these subsections of § 6324 differ, with
subsection (a)(2) limiting personal liability for estate taxes “to the extent
of the value, at the time of the decedent’s death,” 26 U.S.C. § 6324(a)(2),
and subsection (b) limiting gift tax liability “to the extent of the value of
such gift,” id. § 6324(b), estate and gift taxes “are in pari materia and
must be construed together.” Sanford v. Comm’r, 308 U.S. 39, 44
(1939); see also Chambers v. Comm’r, 87 T.C. 225, 231 (1986) (same).
Thus, while the government’s citation to Marshall is not authoritative, it
does provide persuasive support for the government’s position.
28
We have long recognized that “[t]he application of judicial estoppel is
not limited to bar the assertion of inconsistent positions in the same
litigation, but is also appropriate to bar litigants from making
incompatible statements in two different cases.” Hamilton v. State Farm
Fire & Cas. Co., 270 F.3d 778, 783 (9th Cir. 2001) (citations omitted).
38 UNITED STATES V. PAULSON
moment.” 29 Id. at 749–50 (internal quotation marks and
citations omitted).
The Court has identified three non-exclusive factors that
should “inform” a court’s decision whether to apply judicial
estoppel: (1) “a party’s later position must be ‘clearly
inconsistent’ with its earlier position”; (2) “the party has
succeeded in persuading a court to accept that party’s earlier
position, so that judicial acceptance of an inconsistent
position in a later proceeding would create ‘the perception
that either the first or the second court was misled’”; and (3)
“the party seeking to assert an inconsistent position would
derive an unfair advantage or impose an unfair detriment on
29
Importantly, judicial estoppel differs significantly from other estoppel
doctrines, such as equitable estoppel. See Teledyne Indus., Inc. v. NLRB,
911 F.2d 1214, 1219 (6th Cir. 1990) (“Although each of these doctrines
deals with the preclusive effect of previous legal actions, the similarity
ends there.”). “Judicial estoppel exists to protect the courts from the
perversion of judicial machinery through a party’s attempt to take
advantage of both sides of a factual issue at different stages of the
proceedings.” Id. at 1220 (internal quotation marks and citation
omitted). “In contrast, equitable estoppel serves to protect litigants from
unscrupulous opponents who induce a litigant’s reliance on a position,
then reverse themselves to argue that they win under the opposite
scenario.” Id. (citation omitted). And while the Supreme Court has
explained, in the context of equitable estoppel, that “it is well settled that
the Government may not be estopped on the same terms as any other
litigant,” Heckler v. Cmty. Health. Servs. of Crawford Cnty., Inc., 467
U.S. 51, 60 (1984), judicial estoppel may be applied to prevent the
government from asserting inconsistent legal arguments, United States
v. Liquidators of Eur. Fed. Credit Bank, 630 F.3d 1139, 1147–49 (9th
Cir. 2011) (holding that judicial estoppel barred the government from
arguing that defendant could not raise legal claims challenging
forfeitability in ancillary proceedings, after earlier arguing that defendant
could raise their arguments during ancillary proceedings).
UNITED STATES V. PAULSON 39
the opposing party if not estopped.” Id. at 750–51 (internal
quotation marks and citations omitted).
If these considerations were applied to the government’s
representations here—that § 6324(a)(2) does not allow the
government to impose personal liability for unpaid estate
taxes in an amount that exceeds the value of the property
received—judicial estoppel could be applied to prevent the
government from taking a contrary position in later
litigation. First, such a position would be contrary to the
government’s position in this case. Second, the government
has succeeded in persuading us to accept its position, and
judicial acceptance of an inconsistent position in a later
proceeding would create the impression that either we, or the
later court, were misled. Third, allowing the government to
take a contrary position in later litigation would unfairly
prejudice the taxpayers in the subsequent litigation, who
may have relied on the government’s position, and would
also prejudice the second court. See Rissetto v. Plumbers &
Steamfitters Local 343, 94 F.3d 597, 604 (9th Cir. 1996)
(explaining that “the interests of the second court are
uniquely implicated and threatened by the taking of an
incompatible position”).
Moreover, there are cases that, while not directly
addressing the issue before us now, include statements that
lend support to the government’s argument that it does not
seek to impose liability for estate taxes that exceed the value
of the property received. See Geniviva, 16 F.3d at 523(construing § 6324(a)(2) and noting that “[t]his section
provides that if estate taxes are not paid when due, the
beneficiaries are liable up to the amount received from the
estate”); Schuster v. Comm’r, 312 F.2d 311, 315 (9th Cir.
1962) (considering § 827(b), a predecessor statute that
included the same language as § 6324(a)(2), and explaining
40 UNITED STATES V. PAULSON
that the statute imposed some limitations on a transferee’s
liability because “it requires that a deficiency be due from
the estate, and that his [or her] liability therefor is limited to
the value of the estate corpus which he [or she] received”).
Finally, defendants have not identified, and our research
has not uncovered, any case in which the government has
attempted to impose personal liability for estate taxes that
exceeded the value of the property received. The absence of
any case law on this point supports the conclusion that this
situation has never been litigated because the government
has never taken this position, which in turn, supports the
conclusion that it is unlikely that the government will
attempt to assert this argument in future litigation.
Thus, we conclude that applying the rule of the last
antecedent does not lead to absurd results, but instead results
in the most natural reading of the statute, consistent with its
structure and context.
D
The defendants also argue that to interpret the statute we
must consider its purpose and intent. Madeleine Pickens
argues that “the purpose of [§] 6324(a)(2) is to provide the
Government with the same avenue to collect taxes from non-
probate property that it has with respect to probate property.”
She reasons that just as probate property must “pass[]
through the hands of the executor,” the “beneficiaries of a
decedent’s trust can only take possession of trust property
after it has passed through the hands of the trustee.” Thus,
she concludes that the government’s interests “are fully
protected when [§] 6324(a)(2) imposes personal liability on
a trustee of the decedent’s trust who distributes property to a
trust beneficiary without first paying the tax.”
UNITED STATES V. PAULSON 41
But nothing in the statutory text supports her argument
that Congress’s purpose in enacting §6324(a)(2) was to
impose personal liability for unpaid estate taxes on those
persons, “including trustees,” who “stand in the same
position as the executor.” The statute does not impose
personal liability for unpaid estate taxes based on the
existence or exercise of a fiduciary duty to the estate. 30
Instead, § 6324(a)(b) imposes personal liability, based on
receipt or possession of property from the gross estate, on
the categories of persons listed in the statute, and that list
does not include executors or administrators. And while the
list includes trustees, it also includes transferees, spouses,
beneficiaries, and others who do not act as fiduciaries or
administrators of the estate. 26 U.S.C. § 6324(a)(2). We
therefore find no basis to conclude that personal liability for
unpaid estate taxes on non-probate property under
§ 6324(a)(2) is intended to mirror an executor’s liability for
distributions of probate property.
Vikki Paulson and Crystal Christensen also argue that we
should interpret the statute based on Congress’s intent. They
baldly assert that “Congress did not intend that individuals
who had no control over estate property at the date of the
decedent’s death be held liable for unpaid estate taxes.” This
argument, like Madeleine Pickens’ “purpose of the statute”
argument, fails because it has no support in the statutory text.
There is nothing in the statute that suggests that liability for
unpaid estate taxes is based on the opportunity to ensure that
taxes are paid at a particular time; instead, the statute
30
Indeed, other sections of the tax code and regulations address the
collection of taxes from fiduciaries. See 26 U.S.C. § 6901 (providing
methods of collection of taxes from transferees and fiduciaries); 26
C.F.R. § 20.2002-1 (explaining the liability of executors, administrators,
and others).
42 UNITED STATES V. PAULSON
imposes personal liability on those who receive or have
estate property. § 6324(a)(2).
E
The defendants also argue that ambiguities in tax statutes
must be resolved in favor of the taxpayer and against the
government. However, as the United States argues, the
“modern validity” of the “taxpayer rule of lenity” is
“questionable.” See Colgate-Palmolive-Peet Co. v. United
States, 320 U.S. 422, 429–30 (1943) (resolving ambiguity in
taxing statute in favor of the government); Maloney v.
Portland Assocs., 109 F.2d 124, 126 (9th Cir. 1940)
(“[T]here is considerable doubt as to the present existence of
the old rule to the effect that ambiguities in a taxing act are
to be resolved in favor of the taxpayer.”); SCALIA &
GARNER, supra, at 299–300, & nn.17–19 (explaining that the
Court previously construed tax laws “strict[ly]” and in
“case[s] of doubt . . . against the government,” but the rule
“can no longer be said to enjoy universal approval.”
(footnotes omitted)); see also Fang Lin Ai v. United States,
809 F.3d 503, 507 (9th Cir. 2015) (“[W]e do not
mechanically resolve doubts in favor of the taxpayer but
instead resort to the ordinary tools of statutory
interpretation.”).
Vikki Paulson and Crystal Christensen acknowledge that
“the rule of lenity is sometimes called into question,” but
they argue that the Ninth Circuit “still strictly construes tax
provisions to resolve ambiguity in the taxpayer’s favor.” To
support this broad assertion they cite our decision in United
States v. Boyd, 991 F.3d 1077, 1085 (9th Cir. 2021). But
defendants’ arguments, if accepted, would require us to
stretch Boyd beyond its language and reasoning—in Boyd,
we did not state that the rule of lenity applies to all
UNITED STATES V. PAULSON 43
ambiguous “tax provisions” or that all such provisions must
be strictly construed. See id. at 1085–86. Instead, our
discussion was limited to “tax provision[s] which impose[]
a penalty.” Id. at 1085 (emphasis added).
To be sure, we explained that “our circuit strictly
construes tax penalty provisions independent of the rule of
lenity.” Id. at 1085–86 (emphasis added). Thus, we treated
tax provisions that apply penalties, but not all other tax
provisions, as akin to criminal statutes to which “the rule of
lenity ordinarily applies.” Id.; see also SCALIA & GARNER,
supra, at 296 (explaining that the rule of lenity reflects the
idea that penal statutes must “mak[e] clear what conduct
incurs the punishment” (citations omitted)). Indeed, in Fang
Lin Ai, we considered provisions imposing taxes and
rejected the argument that doubts about such statutes should
be resolved in favor of the taxpayer; instead we explained
that we construe taxing statutes by applying the ordinary
rules of statutory construction. 809 F.3d at 506–07 (citations
omitted).
But we need not decide the modern validity of the rule
of lenity as applied to all tax provisions because that rule
does not apply to the statute at issue here. That is because
“[t]he rule ‘applies only when, after consulting traditional
canons of statutory construction, we are left with an
ambiguous statute.’” Shular v. United States, 140 S. Ct. 779,
787 (2020) (quoting United States v. Shabani, 513 U.S. 10,
17 (1991)); see id. at 788 (Kavanaugh, J., concurring) (“Of
course, when a reviewing court employs all of the traditional
tools of construction, the court will almost always reach a
conclusion about the best interpretation, thereby resolving
any perceived ambiguity. That explains why the rule of
lenity rarely comes into play.” (internal quotation marks and
citation omitted)). As previously explained, after reviewing
44 UNITED STATES V. PAULSON
the text of § 6324(a)(2), applying the canons of
interpretation, and considering other indicia of its meaning,
we are not “left with an ambiguous statute,” see Shular, 140
S. Ct. at 787. Therefore, even if were to conclude that the
rule of lenity remains a valid tool to construe statutes
imposing taxes, it would not apply here.
F
Finally, the defendants argue that we must accept their
interpretation of § 6324(a)(2) because the government’s
interpretation “has been rejected by every court that has ever
considered it,” and that “every court addressing
[§] 6324(a)(2)” agrees with them. But the defendants
grossly overstate the weight of the authority that supposedly
supports their sweeping statements. Indeed, the scant
authority upon which the defendants rely consists of one
decades-old tax court case interpreting a predecessor statute
to § 6324(a)(2), Englert v. Commissioner, 32 T.C. 1008(1959), 31 and one unpublished district court decision relying
on Englert to interpret § 6324(a)(2), United States v.
Johnson, No. CV 11-00087, 2013 WL 3924087 (D. Utah
July 29, 2013). We are not persuaded by the reasoning of
these cases.
In both cases, without any attempt to construe the
statutes by applying the traditional tools—namely the
canons of statutory interpretation—the courts concluded that
because the statutory language could support different
interpretations, the statutes must be deemed ambiguous, and
thus “any doubt as to the meaning of the statutes” must be
31
In Englert, the tax court considered § 827(b) of the Internal Revenue
Code of 1939, as amended by the Revenue Act of 1942. 32 T.C. at 1012,
1017 n.1 & n.4.
UNITED STATES V. PAULSON 45
resolved in the taxpayer’s favor. 32 Englert, 32 T.C. at 1016;
see also Johnson, 2013 WL 3924087, at *5 (“Where there is
ambiguity as to the meaning of a tax statute, the court must
resolve the issue in favor of the taxpayer.”). But, as
discussed above, even if the rule of lenity validly applies to
taxing statutes, it does so “only when, after consulting
traditional canons of statutory construction, we are left with
an ambiguous statute.’” Shular, 140 S. Ct. at 787 (internal
quotation marks and citation omitted). Because the courts in
Englert and Johnson made no attempt to “resolv[e] any
perceived ambiguity,” see id. at 788 (Kavanaugh, J.,
concurring), they erroneously concluded that they were
required to construe the statutes at issue in the taxpayer’s
favor. Therefore, we decline the defendants’ suggestion that
we adopt the reasoning of these cases.
* * * *
After starting our analysis with the text of § 6324(a)(2),
considering other indicia of its meaning including its
structure and context, and applying the canons of statutory
interpretation, we conclude that the statute imposes personal
liability for unpaid estate taxes on the categories of persons
listed in the statute who (1) receive estate property on or
after the date of the decedent’s death, or (2) have estate
property on the date of the decedent’s death. Therefore,
32
Significantly, in the section of Englert finding § 827(b) ambiguous,
the tax court misquoted the provision’s punctuation by omitting a
comma. See 32 T.C. at 1015–16. The court quoted the statute as stating
that liability applies to a person “‘who receives, or has on the date of the
decedent’s death the property included in the gross estate . . .’”, but the
text actually states that liability applies to a person “who receives, or has
on the date of the decedent’s death, property included in the gross estate
. . . .” As discussed in Section III.A, changes in punctuation can change
the meaning of the text.
46 UNITED STATES V. PAULSON
§ 6324(a)(2) imposes personal liability for unpaid estate
taxes on trustees, transferees, beneficiaries, and others listed
in the statute, who receive or have estate property on or after
the date of the decedent’s death.
IV
Our holding that § 6324(a)(2) imposes personal liability
on those listed in the statute, who have or receive estate
property on or after the date of the decedent’s death, does
not completely resolve this matter. We must determine
whether the defendants fall within the categories of persons
listed in the statute and are thus liable for the unpaid estate
taxes.
A
The government argues that the defendants are liable
under the statute as trustees, transferees, and beneficiaries.
Vikki Paulson and Crystal Christensen acknowledge that
they are successor trustees, and James Paulson has not
submitted a brief contesting the district court’s finding that
he was a successor trustee. Thus, these defendants do not
dispute that, if § 6324(a)(2) applies to those who receive or
have estate property after the date of the decedent’s death,
they are liable as “trustees” under § 6324(a)(2).
We therefore conclude that James Paulson, Vikki
Paulson, and Crystal Christensen are liable, as trustees, for
the unpaid estate taxes on property from the gross estate,
held in the living trust, “to the extent of the value, at the time
of the decedent’s death, of such property.” 26 U.S.C.
§ 6324(a)(2). But, as previously discussed and as conceded
by the government, see supra Section III.C.2.b, that liability
is capped at the value of estate property in the living trust at
the time of Allen Paulson’s death, and each defendants’
UNITED STATES V. PAULSON 47
liability cannot exceed the value of the property at the time
that they received or had it as trustees.
B
The government also argues that the ordinary meaning
of “beneficiary” includes “trust beneficiaries” and therefore
Crystal Christensen and Madeleine Pickens are liable as
beneficiaries under § 6324(a)(2) for the unpaid estate
taxes. 33 These defendants acknowledge that they are “trust
beneficiaries,” but they argue that they are not
“beneficiar[ies],” as that term is used in § 6324(a)(2).
Instead, they argue that “beneficiary” in § 6324(a)(2) has a
narrow meaning and applies only to life insurance
beneficiaries. 34
Because the statute does not define “beneficiary,” “we
look first to the word’s ordinary meaning.” See Schindler
Elevator Crop. v. United States, 563 U.S. 401, 407 (2011)
(citing Gross v. FBL Fin. Servs., 557 U.S. 167, 175 (2009)
(“Statutory construction must begin with the language
employed by Congress and the assumption that the ordinary
meaning of that language accurately expresses the legislative
purpose” (internal quotation marks omitted)); Asgrow Seed
Co. v. Winterboer, 513 U.S. 179, 187 (1995) (“When terms
used in a statute are undefined, we give them their ordinary
meaning”). At this first step, we conclude that dictionary
definitions support the government’s broad interpretation,
33
Because we conclude that Crystal Christensen and Madeleine Pickens
are liable for the unpaid estate taxes as beneficiaries under § 6324(a)(2),
we need not address whether they are also liable as “transferees,” as that
term is used in the statute.
34
As we discuss later, infra, at n.36, Madeleine Pickens acknowledges
that beneficiaries may also include beneficiaries of annuity payments.
48 UNITED STATES V. PAULSON
rather than the defendants’ narrow interpretation limiting
liability to insurance beneficiaries. See Beneficiary,
BLACK’S LAW DICTIONARY (11th ed. 2019) (defining
“beneficiary” as “[s]omeone who is designated to receive the
advantages from an action or change; esp., one designated to
benefit from an appointment, disposition, or assignment (as
in a will, insurance policy, etc.), or to receive something as
a result of a legal arrangement or instrument,” and
“[s]omeone designated to receive money or property from a
person who has died”); see also Beneficiary, AMERICAN
HERITAGE DICTIONARY (5th ed. 2018) (“One that receives a
benefit” or “the recipient of funds, property, or other
benefits, as from an insurance policy or trust”); Beneficiary,
WEBSTER’S NEW WORLD COLLEGE DICTIONARY (5th ed
2014) (“[A]nyone receiving benefit” or “a person named to
receive the income or inheritance from a will, insurance
policy, trust, etc. . . . ”); Beneficiary, WEBSTER’S NEW
WORLD DICTIONARY (4th ed. 2003) (“[A]nyone receiving or
to receive benefits, as funds from a will or insurance policy
. . . .”); Beneficiary, 2 OXFORD ENGLISH DICTIONARY (2d ed.
1989) (“[O]ne who receives benefits or favours; a debtor to
another’s bounty . . . .”). Therefore, we conclude that the
ordinary meaning of “beneficiary” includes a “trust
beneficiary.”
C
But we must also consider whether “there is any textual
basis for adopting a narrower definition” of “beneficiary.”
See Schindler, 63 U.S. at 409; see also SCALIA & GARNER,
supra, at 70 (“One should assume the contextually
appropriate ordinary meaning unless there is reason to think
otherwise. Sometimes there is reason to think otherwise,
which ordinarily comes from context.” (emphasis in
original)). The government argues that the text of
UNITED STATES V. PAULSON 49
§ 6324(a)(2) does not indicate that “beneficiary” has a
narrower meaning than its ordinary meaning. The
defendants, however, argue that the context and structure of
the statute support a narrower interpretation.
The defendants rely on two cases interpreting
predecessor versions of the statute, Higley v. Commissioner,
69 F.2d 160 (8th Cir. 1934), and Englert, 32 T.C. 1008(1959), and two cases applying the reasoning of these earlier
cases to interpret § 6324(a)(2), Garrett v. Commissioner,
T.C. Memo. 1994-70 (1994), and Johnson, 2013 WL
3924087 (D. Utah 2013). As we explain next, we are not
persuaded by these cases, or the defendants’ arguments, that
the structure or context of the statute support a narrow
interpretation that overcomes the ordinary meaning of
beneficiary.
We start with Higley v. Commissioner, in which the
Eighth Circuit interpreted the word “beneficiary” in § 315(b)
of the Revenue Act of 1926. 69 F.2d at 162. The text of this
predecessor statute, however, differs significantly from the
text of § 6324(a)(2), and so § 315(b)’s relevance to our
analysis is limited. Section 315(b) provided:
If (1) the decedent makes a transfer, by trust
or otherwise, of any property in
contemplation of or intended to take effect in
possession or enjoyment at or after his death
. . . or (2) if insurance passes under a contract
executed by the decedent in favor of a specific
beneficiary, and if in either case the tax in
respect thereto is not paid when due, then the
50 UNITED STATES V. PAULSON
transferee, trustee, or beneficiary shall be
personally liable for such tax[.]
Id. (quoting 26 U.S.C. § 1115(b) (emphasis added)). As the
court recognized in its analysis of the statute, § 315(b)
expressly addressed two types of property dispositions: (1)
“transfers,” including “trusts,” and (2) “insurance,” and
imposed liability on the “transferee, trustee, or beneficiary.”
Id. Indeed, the statute specifically referred to “insurance . .
. in favor of a specific beneficiary.” Id. The court concluded
that this structure meant that the word “trustee” was
“employed in connection with trust only,” and the word
“beneficiary” “applies only to insurance policy
beneficiaries.” Id.
But this direct textual and structural correlation between
(1) dispositions by “transfers” and” trusts” to the liability of
a “transferee” or “trustee,” and (2) dispositions of “insurance
. . . in favor of a specific beneficiary” to the liability of a
“beneficiary,” is not present in § 6324(a)(2). We therefore
conclude that the court’s analysis in Higley, based on the text
and structure of § 315(b), does not support the defendants’
narrow interpretation of “beneficiary” in § 6324(a)(2).
We next consider Englert v. Commissioner, in which the
Tax Court interpreted another predecessor statute, § 827(b)
of the Internal Revenue Code of 1939, as amended by the
Revenue Act of 1942. 32 T.C. at 1012-13, 1015. The
structure of this predecessor statute also differs from
§ 6324(a)(2). Section 879(b), in relevant part, provided:
If the tax herein imposed is not paid when
due, then the spouse, transferee, trustee,
surviving tenant, person in possession of the
property by reason of the exercise,
UNITED STATES V. PAULSON 51
nonexercise, or release of a power of
appointment, or beneficiary, who receives, or
has on the date of the decedent’s death,
property included in the gross estate under
section 811(b), (c), (d), (e), (f), or (g), to the
extent of the value, at the time of the
decedent’s death, of such property, shall be
personally liable for such tax.
Id. at 1017, n.4 (quoting 26 U.S.C. § 827(b)).
As the Tax Court noted, § 827(b) “names six classes of
persons who, . . . may be personally liable for the unpaid
tax.” Id. at 1012. These six classes—(1) spouse, (2)
transferee, (3) trustee, (4) surviving tenant, (5) person in
possession, and (6) beneficiary—correspond directly to, and
in the same order as, the property included in the gross estate
in §§ 811 (b), (c), (d), (e), (f), or (g). Id. at 1012, 1016 (“In
a single sentence of section 827(b) it is provided that there
may be liable six classifications of persons who hold
property includible in the estate under six specific
subsections of section 811 of the Code.”).
The court stated its belief that Congress “studiously
chose a classification applicable to each of such subsections
and included them in section 827(b) in the same order as the
related property interests appeal in subsections (b) through
(g), inclusive, of section 811.” Id. at 1016. Applying this
reasoning, and as petitioner argued, the court concluded that
a person liable under the statute as a beneficiary would be
limited to the beneficiary of a life insurance policy under
§ 811(g). See id. at 1013, 1016.
But § 6324(a)(2) does not include § 827(b)’s precise
correspondence between categories of liable persons and
52 UNITED STATES V. PAULSON
types of property. As the defendants acknowledge, the
statute now lists six categories of liable persons, but then
incorporates nine categories of properties included in the
gross estate. The defendants argue that these changes to the
text and structure of the statute do not change the analysis,
the differing statutory provisions are “substantially the
same,” and the differences in the text should be considered
“minor adjustments.” We are not persuaded by these
arguments.
As an initial matter, in Englert, the tax court found
compelling the direct correlation of the six categories of
persons liable to the six categories of property included in
the gross estate, and concluded it was the result of
Congress’s “studious[] cho[ice.]” Id. at 1016. That direct
correlation is not present in § 6324(a)(2) and we cannot
simply brush aside the differences in the statute’s structure
and text. 35 But even more importantly, § 6324(a)(2) differs
substantively from its predecessor statutes by incorporating
§ 2039, which includes in the gross estate “an annuity of
other payment receivable by any beneficiary,” thus explicitly
applying the word “beneficiary” beyond life insurance
beneficiaries. 36 Therefore, the court’s reasoning in Englert
35
Madeleine Pickens suggests that Congress was aware of Englert when
it enacted § 6324(a)(2) and if it had intended to change the meaning of
the text “it would have stated as much explicitly.” But Englert was
decided in 1959, five years after Congress enacted § 6324(a)(2). See
Internal Revenue Code of 1954, § 6324, 68A stat. i, 780 (1954).
36
Madeleine Pickens acknowledges that although “prior cases have held
that the term ‘beneficiary’ in section 6324(a)(2) means only the
beneficiary of life insurance proceeds, the addition of section 2039 and
its incorporation into section 6324(a)(2) likely means that a beneficiary
of annuity payments would also be considered a ‘beneficiary’ under
UNITED STATES V. PAULSON 53
does not provide a textual or structural basis for us to
conclude that the word “beneficiary” in § 6324(a)(2) should
be limited to beneficiaries of life insurance.
Despite the textual and structural differences between
§ 6324(a)(2) and its predecessor statutes, the defendants rely
on two more recent cases, Garrett and Johnson, to argue that
the reasoning of Higley and Englert “apply with equal force”
to § 6324(a)(2). In Garrett, the court applied the reasoning
of Higley and Englert to conclude that the word
“beneficiary” in § 6324(a)(2) refers only to life insurance
beneficiaries. 37 Garrett, T.C. Memo. 1994-70 at *12-*14.
But the court did not provide any analysis of the text or
structure of § 6324(a)(2), and instead concluded that it found
“nothing in the current statutory language that would warrant
a more expansive definition of ‘beneficiary’ or [a] departure
from earlier precedent under section 827(b).” Id. at *14.
This conclusion is refuted by the substantive differences
between the predecessor statutes, § 315(b) and § 827(b), and
the current statute, § 6324(a)(2), including the current
statute’s explicit expansion of the meaning of the word
beneficiary through the incorporation of § 2039.
section 6324(a)(2).” She recognizes this is a “substantive” difference.
But she suggests this is not important to our interpretation of the statute
because “that question was not before the District Court, is not before
this Court, and need not be decided in order to dispose of the appeal.”
We disagree. This substantive difference between the statutes is highly
relevant and important to their interpretation.
37
In Johnson, the court simply adopted the reasoning of Garrett, without
any additional analysis, 2013 WL 3924087, at *8; we therefore reject its
conclusions for the same reasons we reject the reasoning of Garrett.
54 UNITED STATES V. PAULSON
D
We must also apply the presumption of consistent usage
that “a word or phrase is presumed to bear the same meaning
throughout a text.” SCALIA & GARNER, supra, at 170; see
also id. at 172 (“The presumption of consistent usage applies
also when different sections of an act or code are at issue.”).
In this case, we note that the use of the term “beneficiary,”
in different sections of the tax code and in the regulations,
supports the broader, ordinary meaning of the word.
First, the defendants argue that § 6324(a)(2), by
incorporating § 2042, limits the word “beneficiary” to the
beneficiaries of life insurance policies. However, as
previously noted, § 6324(a)(2) also incorporates § 2039,
which defines a “beneficiary” as one who receives “an
annuity or other payment receivable . . . by reason of
surviving the decedent under any form of contract or
agreement,” but explicitly excludes life insurance
beneficiaries from that definition. 26 U.S.C. § 2039(a).
Thus, by incorporating § 2039, the statute applies the term
“beneficiary” beyond life insurance beneficiaries and thus its
context and structure do not support the defendants’ limited
interpretation.
Second, the same is true for § 679, which is titled
“Foreign trust having one of more United States
beneficiaries.” 26 U.S.C. § 679. This section explains,
outside the context of estate taxes, when a “United States
person” will be liable for taxes on property transferred to a
foreign trust. Throughout this section, the statute refers to
trusts with a “United States beneficiary,” a “beneficiary of
the trust,” a “United States beneficiary for any portion of the
trust,” and when “making a distribution from the trust to, or
for the benefit of, any person, such trust shall be treated as
UNITED STATES V. PAULSON 55
having a beneficiary who is a United States person.” Id.§§ 679(a)(1); (a)(3)(C), (b)(2), & (c). In this section,
although the context differs from personal liability for estate
taxes, the tax code does not limit a “beneficiary” to an
insurance beneficiary.
Finally, the regulations addressing liability for estate
taxes use the term “beneficiary” broadly to indicate those
who receive distributions from the estate, or in other words,
trust beneficiaries. See 26 C.F.R. § 20.2002-1. This section
of the regulations imposes personal liability for unpaid estate
taxes on the executor (or administrator, or any person in
actual or constructive possession of the decedent’s property),
who pays a “debt” of the estate to any person before paying
the debts due the United States. Id. The regulation explains
that “the word debt includes a beneficiary’s distributive
share of an estate.” Id. Thus, the regulation’s references to
a “beneficiary’s distributive share of an estate,” supports the
conclusion that the term beneficiary in the tax code,
including § 6324(a)(2), applies to trust beneficiaries. We
conclude therefore that the presumption of consistent usage
supports applying the ordinary meaning of the word
“beneficiary” in § 6324(a)(2).
E
Finally, the defendants offer policy arguments to support
their interpretation of the statute. Crystal Christensen argues
that because trust beneficiaries have “no power to take estate
property,” or “to distribute it,” they should not be liable for
the estate taxes if a trustee mismanages the estate and
distributes property before “ensuring the estate’s taxes [are]
paid in full.” But the statute does not condition personal
liability for the unpaid estate taxes on the power to take or
distribute estate property. Instead, it imposes personal
56 UNITED STATES V. PAULSON
liability on categories of persons who receive or have estate
property, and those categories include persons who do not
have the power to take or distribute estate property.
Indeed, the defendants recognize that life insurance
beneficiaries are “beneficiaries” under § 6324(a)(2), and life
insurance beneficiaries, like trust beneficiaries, lack to the
power to take or distribute estate property. The same can be
said for transferees, joint tenants, and spouses (who are not
also the trustee or executor), yet the defendants do not
suggest that these categories of persons listed in the statute
are not liable for unpaid estate taxes. Thus, the plain text of
the statute imposes personal liability for unpaid estate taxes
on those who receive or have estate property, without regard
to their ability to take or distribute such property.
The defendants also argue that we should reject the
government’s argument that § 6324(a)(2) employs the
ordinary meaning of the word “beneficiary” because that
interpretation would “render[] the term unlimited to the point
of absurdity.” They suggest that adopting the government’s
interpretation of beneficiary would leave no limits on
liability. But the statute limits a beneficiary’s liability (1) to
the types of property included in the decedent’s gross estate
through §§ 2034–2042, see § 6324(a)(2), and (2) to the value
of the property the beneficiary receives or has, see supra
Section III.C.2.b.
* * * *
We conclude that the ordinary meaning of beneficiary,
which includes trust beneficiaries, applies to § 6324(a)(2),
and we are not persuaded that the structure or context of the
statute, or policy considerations, require a narrower
interpretation as the defendants argue. Moreover, applying
the presumption of consistent usage further supports our
UNITED STATES V. PAULSON 57
conclusion that the term beneficiary in the tax code includes
trust beneficiaries. Therefore, we conclude that Crystal
Christensen and Madeleine Pickens are liable for the unpaid
estate taxes under § 6324(a)(2) as beneficiaries. However,
the liability of each of these defendants cannot exceed the
value of the estate property at the time of decedent’s death,
or the value of that property at the time they received it.
V
Because § 6324(a)(2) imposes personal liability for
unpaid estate taxes on the categories of persons listed in the
statute who receive or have estate property, either on the date
of the decedent’s death or at any time thereafter, subject to
the applicable statute of limitations, and the defendants were
within the categories of persons listed in the statute when
they received or had estate property, we conclude that they
are liable for the unpaid estate taxes as trustees and
beneficiaries. We therefore reverse the district court’s
judgment in favor of the defendants on the United States’
claims under § 6324(a)(2), and remand to the district court
with instructions to enter judgment in favor of the
government on these claims with any further proceedings
necessary to determine the amount of each defendant’s
liability for the unpaid taxes.
REVERSED and REMANDED.
58 UNITED STATES V. PAULSON
IKUTA, Circuit Judge, dissenting:
Our only task in interpreting 26 U.S.C. § 6324(a)(2) is to
determine congressional intent. Because the language of the
statute is ambiguous, we must consider the “most logical
meaning” of the statute. United States v. One Sentinel Arms
Striker-12 Shotgun Serial No. 001725, 416 F.3d 977, 979
(9th Cir. 2005) (One Sentinel) (citation and quotation marks
omitted). The majority and the government effectively
concede that their interpretation of § 6324(a)(2) is not
logical because it would allow a person who receives estate
property years after the estate is settled to be held personally
liable for estate taxes that potentially exceed the current
value of the property received. The taxpayers’s reading of
the statute, which also accords with the plain language of the
text, is more logical: it would allow the government to
impose personal liability for estate taxes only on a person
who receives (or holds) estate property on the date of the
decedent’s death.
Rather than adopt a reasonable interpretation of the
statute that is more likely to reflect congressional intent, the
majority adopts a “hypertechnical reading” of statutory
language that loses sight of the “fundamental canon of
statutory construction that the words of a statute must be read
in their context and with a view to their place in the overall
statutory scheme.” Davis v. Mich. Dep’t of Treasury, 489
U.S. 803, 809 (1989) (citation omitted). In order to justify
this approach, the majority and the government proffer a
number of unpersuasive rationales. First, the government
provides a non-responsive description of its litigating
position: it states it “has consistently argued” that it would
not impose liability greater than the value of the property
received. The majority, in turn, suggests that the result of its
UNITED STATES V. PAULSON 59
interpretation is not likely to occur. But neither the
government’s nor the majority’s assurances about the future
(that individuals are unlikely to be held personally liable for
estate taxes that potentially exceed the current value of the
property received from a decedent’s estate) impacts the
interpretation of the statute.
Because the taxpayers’s reading is more plausible and
avoids the majority’s illogical result, it is a better indication
of Congress’s intent. The inquiry should end there.
Therefore, I respectfully dissent.
I
A
When an individual dies, an estate tax lien automatically
arises and attaches to the decedent’s gross estate. 26 U.S.C.
§ 6324(a)(1). Such a lien attaches for a period of ten years
from the date of the decedent’s death, and then automatically
expires. Id. Although the estate tax lien expires after ten
years, the executors of qualifying estates can elect to pay
estate tax payments in installments over a period of fourteen
years. 26 U.S.C. §6166. As a result, the government’s
interest in the last installments is not fully secured by the ten-
year tax lien under § 6324(a)(1). Addressing this issue, the
tax code provides the government with various options to
protect its interests beyond the ten-year § 6324(a)(1) period,
including the option to require a surety bond pursuant to 26
U.S.C. § 6165, see 26 U.S.C. § 6166(k)(1), and the option to
require a special lien pursuant to 26 U.S.C. § 6324A. See
United States v. Spoor, 838 F.3d 1197, 1205 (11th Cir. 2016)
(noting that a § 6324A lien is a means of requiring “full
collateral” for a § 6166 deferral); see also 26 U.S.C.
§ 6166(k)(2).
60 UNITED STATES V. PAULSON
In addition to a lien, § 6324(a)(2) imposes personal
liability for estate taxes on individuals listed in the statute.
A listed individual “who receives, or has on the date of the
decedent’s death, property included in the [decedent’s] gross
estate . . . shall be personally liable” for the unpaid estate tax
up to “the extent of the value” of such property “at the time
of the decedent’s death.” 26 U.S.C. § 6324(a)(2). Like the
substantially similar language in the predecessor statute,
§ 827(b) of the 1939 Internal Revenue Code, 1 this language
imposes personal liability only on “the person who ‘on the
date of the decedent's death’ receives or holds the property
of a transfer made in contemplation of, or taking effect at,
death.” Englert v. Comm’r, 32 T.C. 1008, 1016 (1959); see
also Garrett v. Comm’r, 67 T.C.M. (CCH) 2214, at *14
(1994); United States v. Johnson, 2013 WL 3924087, at *5
(D. Utah July 29, 2013). In this context, the words
“receives” and “has” at the date of death refer to two
different situations. The phrase “has on the date of
decedent’s death” refers to a person who holds property
transferred within three years before the decedent’s death,
which is considered part of the decedent’s gross estate for
1
Section 827(b) provided:
If the tax herein imposed is not paid when due, then
the spouse, transferee, trustee, surviving tenant, person
in possession of the property by reason of the exercise,
nonexercise, or release of a power of appointment, or
beneficiary, who receives, or has on the date of the
decedent's death, property included in the gross estate
under section 811(b), (c), (d), (e), (f), or (g), to the
extent of the value, at the time of the decedent's death,
of such property, shall be personally liable for such
tax.
26 U.S.C. § 827(b) (1939) (emphasis added).
UNITED STATES V. PAULSON 61
tax purposes. See 26 U.S.C. § 2035(c)(1). The phrase
“receives . . . on the date of decedent’s death,” refers to
“property received by persons solely because of decedent’s
death,” and “which was not in the possession of one of the
persons . . . at the moment of decedent’s death, but who
immediately received such property solely because of
decedent’s death.” Garrett, 67 T.C.M. (CCH) at *13 (citing
Englert, 32 T.C. 1016). Thus, a taxpayer who becomes
trustee of a trust on the date of decedent’s death is
“personally liable as a transferee for the estate tax because it
was in possession of property includable in decedent’s gross
estate at the date of death.” Id. at *14 (citing Estate of
Callahan v. Comm’r, 42 T.C.M. (CCH) 362 (1981)).
Although Congress amended § 6324 in 1966, it did not
change the syntax of § 6324(a)(2). This indicates that
Congress intended to keep the then-current judicial
interpretation. See Lorillard v. Pons, 434 U.S. 575, 580
(1978) (“Congress is presumed to be aware of an
administrative or judicial interpretation of a statute and to
adopt that interpretation when it re-enacts a statute without
change.” (citations omitted)).
B
In this case, the estate elected to defer payments over
fourteen years. But the government failed to use the options
available to protect its unsecured interests in deferred
payments. See supra, at 59. It also failed to hold Michael
Paulson, the trustee of the decedent’s trust on the date of the
decedent’s death, personally liable for the estate taxes due,
United States v. Paulson, 445 F. Supp. 3d 824, 831 (S.D.
Cal. 2020), even though such liability may extend after the
expiration of the ten-year estate tax lien provided for in
§ 6324(a)(1). See, e.g., Internal Revenue Manual 5.5.8.3
(June 23, 2005) (stating that 26 U.S.C. § 6502 applies to
62 UNITED STATES V. PAULSON
assess personal liability under § 6324(a)(2)); 26 U.S.C.
§ 6502(a) (providing for ten-year period after assessment of
taxes for collection); Id. § 6503(d) (tolling ten-year period
when 26 U.S.C. § 6166 election is made).
To compensate for its failures to use the available
statutory options to collect estate taxes, the government here
adopted a novel reading of § 6324(a)(2). Although the
accepted reading of this language (as noted in Garrett, 67
T.C.M. (CCH) at *14) is that it imposes personal liability for
estate taxes on any person who receives (or has) property on
the decedent’s date of death, the government for the first
time reads this language as imposing liability on a person
“who receives” property of the estate at any time, even years
after the decedent’s death. Under this interpretation, the
government calculates the estate tax based on the value of
property on the date of decedent’s death, and then imposes
personal liability for this tax on a person who receives the
property years later. This means that the individual’s tax
liability may be completely disproportionate to the value of
the property when the individual eventually receives it.
The majority justifies its adoption of the government’s
novel reading based on the lack of a comma after the word
“has.” The majority views the absence of a comma as
triggering the doctrine of the last antecedent, a rule of
statutory construction which states that “a limiting clause or
phrase . . . should ordinarily be read as modifying only the
noun or phrase that it immediately follows.” Lockhart v.
United States, 577 U.S. 347, 351 (2016) (citation omitted).
But while “[p]unctuation is a permissible indicator of
meaning,” Navajo Nation v. U.S. Dep’t of Interior, 819 F.3d
1084, 1093 (9th Cir. 2016) (citing Antonin Scalia & Bryan
A. Garner, READING LAW: THE INTERPRETATION OF LEGAL
TEXTS 161–65 (2012)), it “can assuredly be overcome by
UNITED STATES V. PAULSON 63
other indicia of meaning,” Barnhart v. Thomas, 540 U.S. 20,
26 (2003) (citation omitted). The “last antecedent principle
is merely an interpretive presumption based on the
grammatical rule against misplaced modifiers.” Payless
Shoesource, Inc. v. Travelers Cos., Inc., 585 F.3d 1366,
1371–72 (10th Cir. 2009). “At the same time, though, we
know that grammatical rules are bent and broken all the
time,” and we should not rely solely on grammar in
interpreting a text “when evident sense and meaning require
a different construction.” Id. (citation and internal quotation
marks omitted).
Like other circuits, we have acknowledged that the last
antecedent canon is inapplicable when it creates illogical
results and the statute’s plain language gives rise to a more
logical reading. See One Sentinel, 416 F.3d at 979. In One
Sentinel, the government brought a civil forfeiture action
against a Sentinel Arms Striker-12 shotgun on the ground
that it was “a ‘destructive device’ possessed in violation of
the National Firearms Act.” Id. at 978. The Act defined a
destructive device as
any type of weapon by whatever name known
which will, or which may be readily
converted to, expel a projectile by the action
of an explosive or other propellant, the barrel
or barrels of which have a bore of more than
one-half inch in diameter, except a shotgun
or shotgun shell which the Secretary finds is
generally recognized as particularly suitable
for sporting purposes[.]
Id. at 979 (citing 26 U.S.C. § 5845(f)(2)) (emphasis and
alteration in original).
64 UNITED STATES V. PAULSON
The claimant argued that “according to the doctrine of
the last antecedent, the clause ‘which the Secretary finds is
generally recognized as particularly suitable for sporting
purposes,’ modifies ‘shotgun shell,’ but not ‘shotgun.’” Id.In other words, due to the lack of a comma after “or shotgun
shell” the doctrine of the last antecedent required the statute
to be read as defining a destructive device as “any type of
weapon . . . except a shotgun.” Id.We rejected that argument because following the last
antecedent doctrine would have created the illogical result
that no shotgun could be a “destructive device.” Id. We
explained that “the doctrine of the last antecedent must yield
to the most logical meaning of a statute that emerges from
its plain language and legislative history.” Id. at 979(citation and quotation marks omitted). Therefore, we
declined to apply the last antecedent canon and interpreted
the relevant clause as if an omitted comma after “shell” were
included. Id.The same principle applies here. The government and
majority implicitly concede that the government’s reading of
the statute potentially results in allowing the government to
impose personal liability for unpaid estate taxes on trust
asset recipients in excess of the value of the assets received.
This could occur under the government’s interpretation, for
instance, if property of the estate had a high value at the time
of the decedent’s death but decreased precipitously by the
time it was received by a beneficiary. In such a case, the
beneficiary would nevertheless be personally liable for the
unpaid estate taxes based on the value of the property on the
date of death, even if the property were worth mere cents on
the dollar when received by the beneficiary. Congress could
not have intended to make a person who receives property
UNITED STATES V. PAULSON 65
many years after a settlor’s death personally liable for estate
taxes that exceed the value of the property received.
The majority claims the taxpayers “are impliedly
invoking the canon against absurdity,” and then refutes this
strawman argument by pointing to the “high bar” for
invoking this canon. But because the canon against
absurdity applies only when a court departs from the plain
meaning of a statute, see, e.g., Lamie v. U.S. Tr., 540 U.S.
526, 534 (2004); Taylor v. Dir., Off. of Workers Comp.
Programs, 201 F.3d 1234, 1241 (9th Cir. 2000), it is not
implicated here. The taxpayers do not ask the court to
disregard the text of § 6324(a)(2). Rather, the taxpayers
offer an interpretation of its text that is superior to the
government’s, in that it avoids an illogical reading based
solely on the lack of a comma after the word “has.” See
Tovar v. Sessions, 882 F.3d 895, 904–05 (9th Cir. 2018).
C
While the majority primarily focuses on the doctrine of
the last antecedent to support its interpretation of
§ 6324(a)(2), it makes an additional textual argument. First,
it correctly notes that the statute refers to a person who
receives “property included in the gross estate under sections
2034 to 2042, inclusive.” Likewise, it correctly notes that
§§ 2034 to 2042 refer to property such as annuities, life
insurance proceeds, or property subject to a general power
of appointment given to transferees listed in § 6324(a)(2).
From these undisputed premises, the majority erroneously
concludes that a transferee could not receive the sort of
property described in §§ 2034 to 2042 on the date of the
decedent’s death, and therefore “personal liability for the
estate tax applies to those who receive estate property, on or
after the date of the decedent’s death.”
66 UNITED STATES V. PAULSON
But the taxable property in the decedent’s gross estate,
which includes the interest in the annuity, insurance
proceeds, or property subject to a power of appointment, can
be transferred on the date of decedent’s death. Indeed, as a
leading treatise explains, “[n]on-probate assets
under Section 6324(a)(2) [the assets identified in §§ 2034
to 2042] are primarily those assets of the decedent,
includable in the gross estate, that were transferred prior to
death, or were held in such a way that ownership transferred
automatically upon death.” William Elliott, FEDERAL TAX
COLLECTIONS, LIENS & LEVIES, at § 27:23� Transferee
Liability (Dec. 2022). A taxpayer receives the interest in the
property “immediately” on the date of death, and is liable for
estate taxes on its value, even if the assets at issue are not
distributed until later. Garrett, T.C.M. (CCH) at *13
(“Congress used the word ‘receives’ to take care of property
solely because of decedent’s death such as insurance
proceeds or property which was not in the possession of one
of the persons described [in the predecessor to § 6324(a)] at
the moment of decedent’s death, but who immediately
received such property solely because of decedent’s death.”
(citation omitted)). The transferees are personally liable to
the extent of the value of their interest in these assets on the
date of death. See Elliott, supra at § 27:23 Transferee
Liability. And the present value of such interest is
determined as of the date of death even if the actual annuity
payments or insurance proceeds are not distributed until
some later date. See Magill v. Comm’r, 43 T.C.M. (CCH)
859, at n.21 (1982), aff'd sub nom. Berliant v. Comm'r, 729
F.2d 496 (7th Cir. 1984) (holding that a taxpayer’s “liability
under section 6324(a)(2) is measured by the value of the
property at date of death,” and so the taxpayers would
normally be personally liable for the value of their interest
UNITED STATES V. PAULSON 67
in the annuity at the date of death, “rather than the lesser
amount of the subsequent cash distributions”); see also
Baptiste v. Comm’r, 63 T.C.M. (CCH) 2649 (1992), aff’d,
29 F.3d 1533 (11th Cir. 1994) (“[P]etitioner is liable at law
for the unpaid estate tax to the extent of the value, at the time
of decedent’s death, of petitioner’s interest in the proceeds
of insurance on decedent’s life.”).
D
As an alternative to its textual arguments, the majority
attempts to defend its interpretation by predicting that its
illogical results are unlikely to occur. 2 But the majority cites
no support for its approach of interpreting statutes based on
predictions regarding future events. Nor can it, because our
job is merely to discern the most reasonable interpretation of
the statute, which requires us to take into account its “most
logical meaning.” One Sentinel, 416 F.3d at 979 (citation
and quotation marks omitted).
In any event, the majority’s assurances are unpersuasive,
even on their own terms. First, the majority claims that the
illogical result caused by the government’s interpretation
can be avoided because an individual poised to receive trust
assets “must not have disclaimed or refused [trust]
property.” In other words, according to the majority,
prospective recipients of trust assets are amply protected
because they can simply refuse assets that will suffer too
great a decrease in value.
The majority’s argument does not survive scrutiny.
Federal disclaimer law applies in this context. See 26 U.S.C.
§ 2518 (disclaimers); Treasury Reg. § 25.2518-2(c)(5); see
2
Once again, the government does not raise this argument.
68 UNITED STATES V. PAULSON
also Borris Bittker & Lawrence Lokken, FEDERAL
TAXATION OF INCOME, ESTATES AND GIFTS ch. 121.7
Disclaimers, 1997 WL 440123, at 14 (July 2022). Under
federal law, in order to make an effective disclaimer of an
interest in property, a person must comply with strict
requirements. 26 U.S.C. § 2518; Treasury Reg. § 25.2518-
2. With some minor exceptions not applicable here, the
person must make, in writing, “an irrevocable and
unqualified” refusal to accept an interest in property, no later
than nine months after the date of the decedent’s death
regardless whether the person has received the property. 3
See Treasury Reg. § 25.2518-2(a)–(c); see also id.
§ 25.2518-2(c)(3)(i) (“With respect to transfers made by a
decedent at death or transfers that become irrevocable at
death, the transfer creating the interest occurs on the date of
the decedent’s death, even if an estate tax is not imposed on
the transfer); see also Barker v. Jackson Nat. Life Ins. Co.,
888 F. Supp. 1131, 1133–34 (N.D. Fla. 1995) (“Section
25.2518–2(c)(3) key[s] the disclaimer time (9 months) to run
from the taxable transfer occurring at the date of death.”
(cleaned up)). The person must make this disclaimer within
the nine month period even if the person has only a
contingent interest in the property. Treasury Reg.
§ 25.2518-2(c)(3)(i) (“If the transfer is for the life of an
income beneficiary with succeeding interests to other
persons, both the life tenant and the other remaindermen,
3
There are two exceptions to this rule. A beneficiary who is under 21
years of age has until nine months after his twenty-first birthday in which
to make a qualified disclaimer of his interest in property. 26 C.F.R. § 25-
2518-2(d)(3). And a person who receives the property as the result of
another party disclaiming the property interest must disclaim the interest
within nine months after the date of the transfer creating the interest in
the preceding disclaimant. 26 C.F.R. § 25-2518-2(c)(3).
UNITED STATES V. PAULSON 69
whether their interests are vested or contingent, must
disclaim no later than 9 months after the original transfer
creating an interest.”); see also Breakiron v. Gudonis, 2010
WL 3191794, at *1 (D. Mass. Aug. 10, 2010) (“Under
Treasury Regulation 26 C.F.R. § 25.2518-2(c)(3)(i), . . . a
disclaimer must be made within this nine-month ‘window’
even if the disclaimant’s interest in the disclaimed property
is not then vested or is then contingent.” (cleaned up)). This
requirement applies regardless whether the person had actual
knowledge that such a transfer had been made. See Bittker
& Lokken, at 7 (“The disclaimant’s knowledge of the
interest or lack thereof is irrelevant, and the time thus can
expire before the disclaimant even knows of the existence of
the interest.”).
The majority fails to explain how a person would have
the prescience to know within nine months from the date of
decedent’s death that the value of the interest in property to
be transferred to that person at some point in the future will
dramatically decline many years later (assuming that person
even knows of the existence of such an interest). Without
this prescience, the person would not be able to disclaim
such an asset within the required time frame. At bottom, a
person’s right to disclaim an asset within nine months of
decedent’s death does not avoid the result caused by the
government’s and majority’s interpretation of the statute.
The majority also contends that it “rel[ies] on the
government’s avowals in its briefing and at oral argument
that estate tax liability cannot exceed the value of the
property received.” According to the majority, this promise,
coupled with “judicial estoppel, provides additional
safeguards” against the unfair application of personal
liability under §6324(a)(2). But the government’s actual
statement on appeal—that it “has consistently argued in this
70 UNITED STATES V. PAULSON
case that liability under § 6324(a)(2) is limited to the lesser
of the unpaid estate tax liability or the value of the non-
probate property that the liable person had or received,”—is
merely a description of how the government has argued this
case. It does not represent the government’s interpretation
of § 6324(a)(2) or any promise regarding its future actions.
But even if the government had offered an authoritative
interpretation, the majority misunderstands how the doctrine
of judicial estoppel (which the government does not raise)
would apply in this case. Judicial estoppel is an equitable
doctrine that generally “prevents a party from prevailing in
one phase of a case on an argument and then relying on a
contradictory argument to prevail in another phase.” New
Hampshire v. Maine, 532 U.S. 742, 749 (2001) (quoting
Pegram v. Herdrich, 530 U.S. 211, 227 n.8 (2000)). “Courts
apply the doctrine where a party’s ‘later inconsistent
position’ presents a ‘risk of inconsistent court
determinations.’” New Edge Network, Inc. v. FCC, 461 F.3d
1105, 1114 (9th Cir. 2006). The doctrine is “invoked by a
court at its discretion” to “protect the integrity of the judicial
process.” Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir.
1990).
Judicial estoppel is not applicable here. In future cases,
a court would be bound only by the majority’s interpretation
of § 6324(a)(2) as imposing estate tax liability on a person
who receives property from the decedent’s estate, regardless
when it is received. The majority rejected an interpretation
of the statute that would prevent the imposition of estate tax
liability that exceeded the value of the property received, and
so should the government change its position to argue the
statute allows that, the government’s “later inconsistent
position [would] introduce[] no ‘risk of inconsistent court
determinations.’” New Hampshire v. Maine, 532 U.S. at 751
UNITED STATES V. PAULSON 71
(citation omitted); see also New Edge Network, Inc., 461
F.3d at 1114. Therefore, ordinary principles of judicial
estoppel would not apply.
But even if the government had provided (and the
majority had adopted) an interpretation of § 6324(a)(2)
limiting the government’s ability to impose excessive estate
tax liability, such an interpretation would still not be binding
in future cases. “[I]t is well settled that the [g]overnment
may not be estopped on the same terms as any other litigant”
because public policy considerations allow the government
to change its positions in ways private parties cannot.
Heckler v. Cmty. Health Servs. of Crawford Cnty., Inc., 467
U.S. 51, 60–61 (1984). The government may readily change
its interpretation of a statute; “it suffices that the new policy
is permissible under the statute, that there are good reasons
for it, and that the agency believes it to be better.” FCC v.
Fox Television Stations, Inc., 556 U.S. 502, 515 (2009).
Because the government is free to make changes “in
response to changed factual circumstances, or a change in
administrations.” Nat’l Cable & Telecomm. Ass’n v. Brand
X Internet Servs., 545 U.S. 967, 981–82 (2005) (citation
omitted), we have held that judicial estoppel does not
preclude a government agency from changing its
interpretation of an ambiguous statute, see New Edge
Network, 461 F.3d at 1114. Accordingly, principles of
judicial estoppel would not avoid the illogical results caused
by the government’s (and majority’s) interpretation of the
statute.
Finally, instead of explaining why its statutory
interpretation does not lead to a nonsensical result, the
majority also argues that historically, the government has not
“attempted to impose personal liability for estate taxes that
exceeded the value of the property received.” Even if this
72 UNITED STATES V. PAULSON
were true, it indicates only that the government has managed
up until now to use special liens or surety bonds to secure its
interest, but does not establish that the government’s
interpretation of § 6324(a)(2) is reasonable.
II
The majority has overemphasized a single canon of
statutory construction—the rule of the last antecedent—to
ignore that “fundamental canon of statutory construction that
the words of a statute must be read in their context and with
a view to their place in the overall statutory scheme.” FDA
v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133
(2000) (citing Davis, 489 U.S. at 809). Although the
punctuation chosen by Congress is important, we must also
give due regard to sense and meaning. As our sister circuit
has explained, “while the rules of English grammar often
afford a valuable starting point to understanding a speaker’s
meaning, they are violated so often by so many of us that
they can hardly be safely relied upon as the end point of any
analysis of the parties’ plain meaning.” Payless Shoesource,
Inc., 585 F.3d at 1372. Our binding precedent requires this
approach; we may not read a statute as defining a
“destructive device” to include shotgun shells but not
shotguns merely because of a misplaced comma. One
Sentinel, 416 F.3d at 979. And the Tenth Circuit offers an
example that speaks volumes: “Groucho Marx could joke in
Animal Crackers, ‘One morning I shot an elephant in my
pajamas. How he got into my pajamas I’ll never know,’
leaving his audience at once amused by the image of a
pachyderm stealing into his night clothes and yet certain that
Marx meant something very different.” Payless Shoesource,
Inc., 585 F.3d at 1372. Because I would interpret the statute
according to the most likely intent of Congress, rather than
UNITED STATES V. PAULSON 73
adopt the majority’s mechanical adherence to the rule of the
last antecedent, I respectfully dissent.