FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RALPH H. DAVIS; EVELYN DAVIS, 

Personal Representative, No. 03-72240 Petitioners-Appellants,

IRS No.

v.  210-02

COMMISSIONER OF INTERNAL OPINION REVENUE,

Respondent-Appellee. 

Appeal from a Decision of the

United States Tax Court

Submitted December 10, 2004*

San Francisco, California

Filed January 24, 2005

Before: Jerome Farris, Dorothy W. Nelson, and

Ronald M. Gould, Circuit Judges.

Opinion by Judge Gould

*This panel unanimously finds this case suitable for decision without

oral argument. See Fed. R. App. P. 34(a)(2). 

1047
COUNSEL

Richard S. Calone, Jason W. Harrel, Richard S. Calone, LLP,

Stockton, California, for the petitioner-appellant. 

Eileen J. O’Connor, Assistant Attorney General, Jonathan S.

Cohen, Karen D. Utiger, Tax Division, Department of Justice,

for the respondent-appellee. 

1050 DAVIS v. CIR
OPINION

GOULD, Circuit Judge: 

Petitioner Evelyn L. Davis, the personal representative of

the estate of her late husband, Ralph H. Davis, appeals a Tax

Court decision upholding the determination of a deficiency in

the taxes paid on the Davis estate. Mrs. Davis claims that the

terms of an amended trust included in the Davis estate give

her an unrestricted right to all of the trust income for life, and

that her interest in the trust income qualifies for a marital

deduction pursuant to Internal Revenue Code section

2056(b)(7). We have jurisdiction pursuant to 26 U.S.C. section 7482(a), and we affirm. 

I

On February 24, 1993, decedent Ralph H. Davis executed

both a “Will” and a “Declaration of Trust.” The Will

bequeathed the residue of the decedent’s estate to his daughters, Carol Tawney Pencke and Mary Martha Bennett. The

Declaration of Trust stated that during Ralph H. Davis’s lifetime, “he shall be entitled to all of the net income . . . from

the trust estate, payable in convenient installments, and he

may withdraw such sums as he desires from principal at any

time or times.” The Declaration of Trust also named Pencke

and Bennett as successor beneficiaries following the death of

Ralph H. Davis. If either daughter predeceased Mr. Davis, her

interest would pass to her descendants, per stirpes. 

The decedent then married Evelyn L. Davis, and on April

9, 1996 subsequently executed a “Codicil” and an “Amendment to Declaration of Trust” (“Amendment”). The Amendment stated in part:

2. Life Estate to Surviving Spouse of Trustor: After

the death of trustor survived by his spouse and during the lifetime of his surviving spouse, the trustee

DAVIS v. CIR 1051
shall pay to or apply for the benefit of the surviving

spouse, in quarter annual or more frequent installments, all of the net income from the trust estate as

the trustee, in the trustee’s reasonable discretion,

shall determine to be proper for the health, education, or support, maintenance, comfort and welfare

of grantor’s surviving spouse in accordance with the

surviving spouse’s accustomed manner of living. 

3. Designation of Successor Trustees: The first

successor trustee of the Ralph H. Davis Trust shall

be his spouse, Evelyn L. Davis. In the event Evelyn

L. Davis shall die, become incapacitated or otherwise be unable to administer the trust estate, then

grantor’s daughters, Carol Tawney Pencke and Mary

Martha Bennett, or the survivor of them shall serve

as co-trustees without bond. 

4. Guideline — Other Sources: Beneficiary: In

making distributions to grantor’s surviving spouse,

the trustee, in her reasonable discretion, may consider any other income or resources of the beneficiary known to the trustee and reasonably available.

5. Invasion of Principal for Surviving Spouse —

Narrow Standard: If the trustee shall determine that

the income from this trust and that the income and

principal from the surviving spouse’s own trust shall

be insufficient to maintain surviving spouse’s health,

support and maintenance, the trustee may, after surviving spouse has exhausted all assets of her own

trust, invade the principal of this trust for the benefit

of surviving spouse, in the trustee’s reasonable discretion. 

Ralph H. Davis died on July 14, 1997, leaving a gross

estate of $1,180,823.00. Mrs. Davis, as the personal representative of the Davis estate, claimed a marital deduction in the

1052 DAVIS v. CIR
amount of $573,216.00 under Internal Revenue Code sections

2056(a), 2056(b)(5) and 2056(b)(7). 

The Commissioner reduced the marital deduction by

$564,862.00, allowing the estate to deduct only $8,354.00 in

life insurance proceeds that passed directly to the surviving

spouse and disallowing the deduction for the funds passing in

the amended trust. The Commissioner issued a notice of deficiency in the amount of $220,593.00. The estate appealed the

determination of deficiency to the Tax Court, which held for

the Commissioner. On this appeal, Mrs. Davis has abandoned

her claim for a deduction under section 2056(b)(5), but continues to claim that the terms of the Amendment qualify for

a marital deduction under section 2056(b)(7). 

II

[1] Under the Internal Revenue Code, the taxable estate of

a decedent is computed by taking the gross estate defined in

section 2031 and subtracting the deductions listed in sections

2053, 2054, 2055 and 2056. I.R.C. § 2051. Section 2056

describes the marital deduction.1 Although property passing

from a decedent to a surviving spouse generally qualifies for

a marital deduction from the federal estate tax, I.R.C.

§ 2056(a), life estates and other terminable interests passing

to a surviving spouse are not deductible unless they qualify

for an exception under section 2056(b)(5) or section

2056(b)(7). I.R.C. § 2056(b)(1).2

1The purpose of allowing a marital deduction is to treat a husband and

wife as a single unit for computing estate taxation. Any assets not taxed

in a decedent’s estate are taxable in the surviving spouse’s estate under

section 2044. 

2The marital deduction is “to be strictly construed and applied.”

Comm’r v. Estate of Bosch, 387 U.S. 456, 464 (1967); see also Estate of

Shedd v. Comm’r, 237 F.2d 345, 357 (9th Cir. 1956) (“[S]tatutory exemptions from taxes of this kind should be strictly construed against the taxpayer, and are held applicable only to subject matter or beneficiaries

clearly within their terms.”). The taxpayer bears the burden of showing

that he or she meets every condition of a tax exemption or deduction. Deputy v. du Pont, 308 U.S. 488, 493 (1940); White v. United States, 305 U.S.

281, 292 (1938). 

DAVIS v. CIR 1053
[2] To qualify for a marital deduction under section

2056(b)(7), a marital trust must consist of property “(I) which

passes from the decedent, (II) in which the surviving spouse

has a qualifying income interest for life, and (III) to which an

election under [section 2056(b)(7)] applies.” I.R.C.

§ 2056(b)(7)(B)(i). A deduction under section 2056(b)(7) is

also known as a Qualified Terminable Interest Property, or

QTIP, deduction. A surviving spouse has a “qualifying

income interest for life” if he or she is “entitled to all the

income from the property, payable annually or at more frequent intervals, or has a usufruct interest for life in the property,” and “no person has a power to appoint any part of the

property to any person other than the surviving spouse.”

I.R.C. § 2056(b)(7)(B)(ii). 

The Treasury Regulations elaborate on the requisite degree

of control required to claim a QTIP deduction: A surviving

spouse is “entitled for life to all of the income” if he or she

is “unqualifiedly designated as the life beneficiary of a trust.”

Treas. Reg. § 20.2056(b)-5(f)(1).3 He or she “must have such

command over the income that it is virtually hers.”

4

 Treas.

Reg. § 20.2056(b)-5(f)(8). To meet these standards, a surviving spouse must show that he or she “(i) is entitled to the

income until the trust terminates, or (ii) has the right, exercisable in all events, to have the corpus distributed to her at any

time during her life.” Treas. Reg. § 20.2056(b)-5(f)(6). A trust

does not qualify for a QTIP deduction “to the extent that the

income is required to be accumulated in whole or in part or

may be accumulated in the discretion of any person other than

the surviving spouse . . .” Treas. Reg. § 20.2056(b)-5(f)(7). 

3Treasury regulations are the authoritative interpretation of the Internal

Revenue Code so long as they are reasonable. Cottage Sav. Ass’n v.

Comm’r, 499 U.S. 554, 560-61 (1991); Sessler v. United States, 7 F.3d

1449, 1451 n.2 (9th Cir. 1993). 

4The principles of Treas. Reg. § 20.2056(b)-5(f) apply to determine the

definition of the phrase “entitled for life to all of the income.” Treas. Reg.

§ 20.2056(b)-7(d)(2). 

1054 DAVIS v. CIR
In Estate of Ellingson v. Commissioner, we considered a

“Marital Deduction Trust” that named the surviving spouse as

a co-trustee and provided that “if the income so payable to the

Surviving Settlor shall, at any time or times, exceed the

amount which the Trustee deems to be necessary for his or

her needs, best interests and welfare, the Trustee may accumulate the same, as the Trustee deems advisable.” 964 F.2d

959, 960 (9th Cir. 1992). We concluded that, under the circumstances in that case, the “best interests and welfare” language was sufficiently broad to entitle the surviving spouse

“to all the income from the property” for life under section

2056(b)(7)(B)(ii)(I). Id. at 964-65. In dicta, we noted that

other language, such as “necessary or proper to provide for

. . . care, comfortable maintenance, and support and reasonable comfort” and “usual and customary standard of living”

would not fall within the terms of section 2056(b)(7) because

“reformation of the interest-creating instrument would [be]

required to grant the QTIP deduction.” Id.; see also Estate of

Rapp v. Comm’r, 140 F.3d 1211, 1213, 1218 (9th Cir. 1998)

(holding insufficient for QTIP purposes a trust that gave surviving children discretion to distribute income to provide for

the surviving spouse’s “health, education and support”);

Wisely v. United States, 893 F.2d 660 (4th Cir. 1990); Estate

of Nicholson v. Comm’r, 94 T.C. 666, 668-74 (1990). 

[3] When a decedent chooses to limit the degree of control

that his or her surviving spouse has over the income from a

terminable interest property, the decedent also precludes the

possibility that his or her estate may claim a QTIP deduction

under section 2056(b)(7). A section 2056(b)(7) marital deduction is available only when a decedent leaves a surviving

spouse complete control over the income from a property for

life.5 Conversely, if a surviving spouse’s interest in the property income is limited and thus cannot be equated with virtual

5A surviving spouse may take a marital deduction for a specific portion

of a property if the income from that portion is entirely under the spouse’s

control. I.R.C. § 2056(b)(7)(B)(iv). 

DAVIS v. CIR 1055
ownership, an estate may not claim a marital deduction under

section 2056(b)(7).6

III

We next consider whether the interest granted to Evelyn L.

Davis under the Declaration of Trust and the Amendment

qualifies for a marital deduction under section 2056(b)(7). 

In determining whether an interest that passes in trust to a

surviving spouse qualifies for a QTIP deduction under section

2056(b)(7), we first look to state law to determine the nature

and extent of the property interest granted to the surviving

spouse, and then turn to federal law to determine whether

these property rights are ultimately subject to taxation. United

States v. Craft, 535 U.S. 274, 278 (2002) (quoting Drye v.

United States, 528 U.S. 49, 58 (1999)); Estate of Heim v.

Comm’r, 914 F.2d 1322, 1327 (9th Cir. 1990).7

A

[4] We first examine how California law views the property

interest that Ralph H. Davis bequeathed to Evelyn L. Davis

under the amended trust. Under California law, a trust must

be construed “according to the intention of the testator as

expressed therein, and this intention must be given effect as

far as possible.” Newman v. Wells Fargo Bank, N.A., 926 P.2d

6The surviving spouse’s complete control of trust income sufficient to

qualify for the marital deduction under section 2056(b)(7) is not defeated

by allowances for trust administration specifically enumerated in the statute and regulations. See, e.g., Estate of Howard v. Comm’r, 910 F.2d 633,

635-37 (9th Cir. 1990). 

7We review Tax Court decisions in the same manner as we review civil

decisions of district courts rendered after a bench trial. Rapp, 140 F.3d at

1214-15; Heim, 914 F.2d at 1325 (quoting I.R.C. § 7482(a)(1)). The parties have stipulated to all the relevant facts. The only remaining issues are

matters of statutory and testamentary interpretation that we review de

novo. Ellingson, 964 F.2d at 960. 

1056 DAVIS v. CIR
969, 973 (Cal. 1996) (quoting Estate of Wilson, 193 P. 581,

582 (1920)). A court must ascertain the intention of the testator by reading the trust instrument as a cohesive whole. Ike v.

Doolittle, 70 Cal. Rptr. 2d 887, 900-01 (Ct. App. 1998). If the

intention of the testator is unambiguous from the face of the

instrument, the rules of statutory construction do not apply,

and the plain language of the trust governs its interpretation.

Burkett v. Capovilla, 5 Cal. Rptr. 3d 817, 819-20 (Ct. App.

2003). 

[5] When read as a whole, the Declaration of Trust and the

Amendment unambiguously indicate that Ralph H. Davis

intended to leave to his surviving spouse an interest in the

trust income that is explicitly restricted by the purposes listed

in the trust. The phrase “all of the net income from the trust

estate” is limited by the language that follows it and does not

give Mrs. Davis an unrestricted interest in any more income

than is “proper for [her] health, education, or support, maintenance, comfort and welfare . . . in accordance with [her]

accustomed manner of living.” Any other construction would

render the limiting language superfluous. It would also create

a tension with other terms in the trust documents: In contrast

to the narrow interest he granted to Mrs. Davis in the Amendment, in the original Declaration of Trust, Ralph H. Davis

gave himself an unrestricted right to “all of the net income”

from the trust estate without any limiting terms. This difference in language indicates that Mr. Davis intended to

bequeath his wife a more limited interest than he had during

his own life. See Ellingson, 964 F.2d at 964. 

[6] The Davis estate argues that California Probate Code

section 21522, which governs “marital deduction gifts,” operates to reform the terms of the Amendment.8

 We disagree.

8California Probate Code section 21522 states: 

If an instrument contains a marital deduction gift: 

(a) The provisions of the instrument, including any power,

duty, or discretionary authority given to a fiduciary, shall be conDAVIS v. CIR 1057
Under section 21522, “a ‘marital deduction gift’ is ‘a gift that

is intended to qualify for the marital deduction.’ ” Heim, 914

F.2d at 1329 (citing former Cal. Prob. Code § 1030(d),

renumbered as Cal. Prob. Code § 21520 (1991)). Under California law, we look to the instruments that created the trust to

determine whether the decedent intended a gift to his or her

surviving spouse to qualify for a marital deduction under section 2056(b)(7). Newman, 926 P.2d at 973. 

[7] Here, neither the Declaration of Trust nor the Amendment contains any language suggesting that Mr. Davis

intended the interest passing to his surviving spouse in trust

to qualify for a marital deduction under section 2056(b)(7),

and the estate has not presented any other evidence from

which we might infer such an intent. The Davis estate argues

that the language “pay to or apply for the benefit of the surviving spouse, in quarter annual or more frequent installments, all of the net income from the trust estate” in the

Amendment is sufficiently similar to the language “entitled to

all the income from the property, payable annually or at more

frequent intervals” in Code section 2056(b)(7)(B)(ii)(I) to

infer that Ralph H. Davis intended, but failed, to mirror the

requirements of 2056(b)(7). We do not agree that an intent to

qualify for a marital deduction can be attributed to Ralph H.

Davis on the basis of this slight similarity in language.

Although a showing that a settlor quoted at length from section 2056(b)(7) might be evidence that he or she intended the

trust to fall within the terms of that provision, here Ralph H.

Davis employed commonly used terms, and the language he

chose only vaguely resembles that of section 2056(b)(7). 

strued to comply with the marital deduction provisions of the

Internal Revenue Code. 

(b) The fiduciary shall not take any action or have any power

that impairs the deduction as applied to the marital deduction gift.

(c) The marital deduction gift may be satisfied only with property

that qualifies for the marital deduction. 

1058 DAVIS v. CIR
California Probate Code section 21522 does not operate to

reform a trust instrument simply because some decedents may

desire to reduce or avoid estate taxes. Heim, 914 F.2d at 1330.

A rational person in the position of Ralph H. Davis might

have wished that his estate be taxed at his death, as it would

have been under the original Declaration of Trust, with the

aim that Mrs. Davis would have only a limited interest in the

trust income and that the remainder would pass to his daughters. 

[8] Because Ralph H. Davis did not leave his wife “a gift

. . . intended to qualify for the marital deduction,” section

21522 of the California Probate Code does not apply to

reform the terms of the Amendment. See id. at 1329. Thus we

determine that Mrs. Davis’s interest is limited under California law, and the Declaration of Trust and the Amendment do

not give her an unqualified right to all of the income from the

trust for life. 

B

We next consider the federal issue whether the property

interest bequeathed by Ralph H. Davis to Evelyn L. Davis

under California law qualifies for a marital deduction under

Internal Revenue Code section 2056(b)(7). 

[9] Under the terms of the Amendment, Mrs. Davis is neither “entitled to the income until the trust terminates,” nor in

possession of “the right, exercisable in all events, to have the

corpus distributed to her at any time during her life.” See

Treas. Reg. § 20.2056(b)-5(f)(6). The Amendment provides

that Mrs. Davis may collect such income as the trustee, “in

the trustee’s reasonable discretion, shall determine to be

proper for the health, education, or support, maintenance,

comfort and welfare of grantor’s surviving spouse in accordance with the surviving spouse’s accustomed manner of living.” This restrictive language precludes Mrs. Davis from

DAVIS v. CIR 1059
having “such command over the income that it is virtually

hers.” See Treas. Reg. § 20.2056(b)-5(f)(8). 

The Davis estate argues that the trust qualifies for a QTIP

deduction under section 2056(b)(7) because the terms of the

Amendment allegedly create a “general power of appointment” under section 2041. We reject this argument. Sections

2041 and 2056 are distinct provisions of the Internal Revenue

Code. These sections do not cross-reference each other, and

the requirements under section 2056 are different than those

under section 2041. Consequently, a surviving spouse might

have a general power of appointment under section 2041, but

not have the requisite control over the income to qualify for

a deduction under section 2056. See BORIS I. BITTKER AND

LAWRENCE LOKKEN, FEDERAL TAXATION OF INCOME, ESTATES

AND GIFTS § 129.4.3 (2d ed. 1993 & Supp. 2004). Even if section 2041 did apply to determining whether an interest qualified as a QTIP, the Amendment does not give Mrs. Davis the

requisite “general power of appointment” because her powers

are limited by an “ascertainable standard.” See Treas. Reg.

§ 20.2041-1(c)(2). 

Although Mrs. Davis is the sole trustee, this does not save

the otherwise defective trust for two reasons. First, even when

acting as trustee, Mrs. Davis can properly only make such distributions to herself as are permitted by the Amendment,

hemmed in by the requirement that income given her be

“proper for the health, education, or support, maintenance,

comfort and welfare of grantor’s surviving spouse in accordance with the surviving spouse’s accustomed manner of living.” Second, Mrs. Davis “might not remain co-trustee until

she dies.” See Ellingson, 964 F.2d at 962. The possibility —

however remote — that the surviving spouse might resign or

become incapacitated prevents a provision naming the surviving spouse as trustee from automatically qualifying an otherwise deficient trust for the marital deduction under section

2056(b)(7). Id. Under the terms of the Amendment, in the

event that Mrs. Davis were to “become incapacitated or otherwise be unable to administer the trust estate” she would no

1060 DAVIS v. CIR
longer serve as trustee. Trust income could then accumulate

“in the discretion of” either one or both of successor trustees

Pencke and Bennett, both “person[s] other than the surviving

spouse . . . ,” precluding a deduction under section

2056(b)(7). See Treas. Reg. § 20.2056(b)-5(f)(7); see also

Ellingson, 964 F.2d at 962. 

The argument that the Amendment should be reformed to

meet the terms of section 2056(b)(7) because Ralph H. Davis

allegedly intended the amended trust to qualify for a QTIP

deduction is likewise unavailing. As we discussed in section

II.B., neither the Declaration of Trust nor the Amendment

contains any indication that Ralph H. Davis intended the trust

to qualify for a QTIP deduction. Even if Davis had clearly

expressed that he intended the trust to qualify for a section

2056(b)(7) deduction, this intent would not reform an otherwise facially defective trust so that it complied with QTIP

requirements. See Shedd, 237 F.2d at 346 (“A court must

interpret a will according to the language that the testator

actually used — not according to what the court might guess

that the decedent might have said if he had chosen the right

words.”). 

[10] Ralph H. Davis did not bequeath to Evelyn L. Davis

an interest sufficient to qualify for a marital deduction under

section 2056(b)(7). Under California law, the unambiguous

terms of the Declaration of Trust and the Amendment give

Mrs. Davis an interest limited to the amount of income proper

for her “health, education, or support, maintenance, comfort

and welfare” in accordance with her “accustomed manner of

living.” This limitation is inconsistent with a conclusion that

Mrs. Davis had virtual ownership of the income from the

trust’s assets. Because this limitation prevents Mrs. Davis

from having complete control over the trust income, the Davis

estate may not claim a marital deduction under section

2056(b)(7) for the interest passing in trust, and the Tax Court

correctly upheld the determination of a deficiency in the taxes

paid on the Davis estate. 

AFFIRMED.

DAVIS v. CIR 1061