Paul Allen’s $26 Billion Estate Offers IRS Enticing Potential

Paul Allen’s vintage warplanes, his private island, and other exceptional assets the billionaire left when he died earlier this week will probably be irresistible to IRS examiners.

The tax agency audits only a small number of estate tax returns—in fiscal year 2017 it examined about 8 percent of the returns filed in calendar year 2016—and 80 percent of those involved estates worth more than $5 million. So the Microsoft Corp. co-founder’s $26 billion estate is likely to pull them in.

“When you look at line one of the estate tax return, which is the gross estate, and it’s in the ...