In 2000, Allen Paulson left behind $193 million fortune, unpaid taxes, family inheritance fight led US authorities to pursue his heirs

Allen Paulson was an American aircraft executive and racehorse owner. A case related to him led to a lengthy legal battle. It was over unpaid estate taxes and whether his heirs could be held personally responsible for the outstanding amount.

Paulson died on July 19, 2000, leaving behind an estate valued at $193.4 million for federal estate-tax purposes. Most of his assets were held in a living trust, which was expected to pay the taxes due after his death.

However, more than $10 million in estate taxes, interest and penalties remained unpaid years later. The US government subsequently pursued several members of his family, arguing that they could be held liable because they had received estate assets or managed the trust.


The dispute eventually reached the US Court of Appeals for the Ninth Circuit, which ruled in favour of the government in May 2023.

All about Allen Paulson

Allen Paulson was an American business man known for his involvement in the aviation industry and horse racing. When he died in 2000, his gross estate was valued at $193,434,344 for federal estate-tax purposes.

His assets included real estate, stocks, bonds, cash and receivables. Nearly all of them were held in a living trust.

Paulson was survived by his third wife, Madeleine Pickens, three sons from an earlier marriage, Richard, James and John Michael Paulson. His family also included grandchildren.

After his death, the estate's assets were distributed among beneficiaries over several years. The tax liability, however, remained a central issue.

Why did the estate fail to pay the taxes?

When the estate filed its federal tax return in October 2001. Notably, it paid part of its tax liability and elected to pay the remaining balance in installments. But, the estate missed some installments, and the IRS terminated the payment arrangement.

By then, it had exceeded $10 million. The government sought to recover the outstanding taxes from the estate, the living trust and certain family members.

Why did US authorities pursue his heirs?

Under Section 6324(a)(2) of the Internal Revenue Code, the government stated that several heirs could be held personally liable.

The Ninth Circuit reversed the lower court's ruling on the government's federal tax claims in 2023, and directed the lower court to enter judgment in favour of the government.

The appeals court ruled in favour of the government, and sent the case back to the lower court to work out how much each family member would have to pay.