It has long been said that the only things certain in life are death and taxes. If you still haven’t filed your taxes, or if you were hit with a big bill this year, the former might seem more appealing than the latter right now. However, the aphorism is death and taxes, not death or taxes. Even kicking the bucket cannot provide an escape.
But what if death isn’t so certain? How would that affect taxes? In a 2012 law review article titled “Death and Taxes and Zombies,” I considered the important question of whether those who die and come back as zombies should be considered dead for estate tax purposes. The answer to this question is important both for the government, which will need significant revenues to protect the living, and for individual taxpayers, who may be tempted to escape the estate tax by becoming zombies.
You may view the chances of a zombie apocalypse as low (don’t say I didn’t warn you). But there’s another kind of living dead we should take seriously. Technological advances have been moving the line between life and death and pushing our understanding of what it means to be alive or even human. Medical technology can now keep people “alive” even absent heart or brain function. Moreover, newspapers are replete with stories of people who were clinically dead yet somehow brought back to life. At present, the lapse between clinical death and revival is pretty short, but as medical science advances, we will likely see that time increase. Perhaps one day they actually will be able to bring back Ted Williams or others like him, who have been dead and cryogenically frozen for months or years. Other technological advances could be relevant, too: Science fiction writers have long imagined a future in which individuals could upload themselves into digital form and possibly download again into new bodies. As computing capacity increases, we get closer and closer to this possibility. Whether or not we are ready, these advances require us to re-examine our assumptions about life and death—and the tax consequences that flow from them.
Under current tax law, dying is a mixed bag. Any gain or loss in the property owned by the deceased disappears at death by virtue of something called the “basis reset.” Thus, someone owning appreciated assets might view death as a good thing, at least from a tax perspective. For instance, imagine a taxpayer who owns a $1 million Ferrari he purchased years ago as an investment for $100,000. If he sells the Ferrari, he will owe taxes on the $900,000 gain. However, if he dies while he owns the car, the basis will reset to $1 million, and his heirs will be able to sell the car without incurring any income tax. Furthermore, those who die with estates greater than $5.25 million (adjusted for inflation) are subject to the estate tax, which maxes out at a whopping 40 percent.
The Internal Revenue Code is surprisingly silent on the question of just what constitutes the moment of death, and we must therefore look to state law for the answer. Some states use a heart function test, while others use a brain function test. Thus, it turns out that whether you’re dead or not depends on where you live. Moreover, the basis-reset provision is in the income tax, while the estate tax provision is, well, part of the estate tax. So it is possible to be dead for estate tax purposes, but not dead for income tax purposes, or vice versa. The implications are dizzying.
Regardless of the test used, the law incorporates an unstated assumption—that death is permanent. This is somewhat surprising considering that most legislators profess to be Christians, whose religious teachings recount a number of resurrections, including Jesus, Lazarus, and Tabitha, and the promise of the same for all true believers during the end of days.
Legal mechanisms currently exist to bring back people who have been presumed dead, though some bugs exist. One poor soul who was presumed dead in Ohio but reappeared years later was recently told that the period for appealing the ruling had run out and that he was legally dead as far as the state was concerned. Here, we are talking about people who have actually died and returned, so it is not clear that these mechanisms would apply.
Among the thorny non-tax issues that will arise for a resurrected Splendid Splinter are whether he should get his property and Social Security number back. Williams wasn’t married when he died, but another issue the recently revived could face is whether they should be deemed still married to their spouses, who might well have remarried in the interim. Marriage, like death, is governed by state law, and the answer to this important question may well vary from state to state.
The tax issues include whether someone who dies—but might be resurrected—should be subject to the estate tax and eligible for a basis reset, and, if he is, what happens when he comes back. If the estate tax is imposed on death and there is a basis reset, we might consider a tax refund and undoing the reset. Otherwise, our hypothetical Ferrari owner above might find it advantageous to die for tax purposes so that he could sell the car with no gain once he was resurrected. However, reversing the tax consequences of death could get quite tricky if too much time has passed.
Another problem may be that while science may be able to resuscitate those who have died, they may come back altered. How can we tell whether the person brought back is actually the same person who died? This is akin to the problem recorded by Plutarch with regard to the ship of Theseus. As each plank of the ship is replaced, at what point is it no longer the same ship? Put differently, if they revive Ted Williams but he can no longer hit a baseball, is he really the Kid? If not, then no refund should be forthcoming—the real Ted Williams is still dead. These questions of identity and continuity currently occupy some very serious thinkers and may one day soon have practical applications.
Perhaps we need to develop a more nuanced understanding of death, à la Miracle Max, who distinguished between “mostly” dead and “all” dead. The estate tax could apply only when someone is all dead (assuming such a thing is still possible), thus avoiding the awkward issues that resurrection would create. However, this could open up a brand-new tax shelter. Imagine someone with significant wealth, who is only mostly dead. Her heirs, who have no intention of bringing her back, could “put her on ice” for years, thereby delaying the application of the estate tax. At some point, deferral of a tax is tantamount to eliminating it. To counter this, one could impose a time limit, say two years, and impose an interest charge.
These questions also point to another important assumption in our current laws regarding death and taxes. Death is defined primarily by virtue of body function. Thus, one who loses himself to Alzheimer’s is gone, but we do not declare him dead until the body dies. We are beginning to recognize that it is the mind that makes us who we are. Nonetheless, declaring someone who is physically alive to be dead is fraught. Who is to decide when the person is sufficiently “gone” to warrant a death certificate? Thus it seems unlikely that this rule will change.
But what should happen when the mind can outlast the body? If uploading simply copies a person’s personality and memories, it should probably be treated as a photograph, though a very smart one. However, if the uploaded version can grow and evolve like the original, or if it becomes possible to download it into a new body, where it can do so, the case that the person has not died with his body gets stronger. And if we recognize an uploaded person as being still alive, what is to stop us from finding that an intelligence that started in silicon form is alive? Clearly, the current laws governing life and death and the tax consequences thereof were not designed for this future.
The estate tax has been under attack on ideological grounds almost since its inception. However, in the end, technological advances may do it in by making it too difficult to administer. We started with the proposition that the only things certain in life are death and taxes. However, as death become less certain, the estate tax, at least, may soon follow.
This article is part of Future Tense, a collaboration among Arizona State University, New America, and Slate. Future Tense explores the ways emerging technologies affect society, policy, and culture. To read more, visit the Future Tense blog and the Future Tense home page. You can also follow us on Twitter.