Sometimes ideas from science illuminate muddled legal thinking. Physics teaches that, for every particle of matter, there exists a corresponding particle of anti-matter. A particle of matter and its corresponding particle of anti-matter are identical except that they have opposite electrical charges. A proton's charge is positive, an anti-proton's negative. When matter and anti-matter meet, they produce the most powerful explosion in nature, totally annihilating each other.
With these laws of physics in mind, consider that a donor can make a gift in one of two ways: either by assuming a debt or by transferring as asset. In an instance in which a donor assumes a debt, who should report this gain to the IRS, the donor or the donee? In the case of a gift made by transferring an asset, the Internal Revenue Code is explicit: the donee reports the gain. In the case of a gift made by assuming a debt, the Code is silent.
However, an analogy with matter and anti-matter provides an answer. The relationship between an asset and a debt is like that of matter and anti-matter. For every asset, there is a corresponding debt or anti-asset. Like a proton and anti-proton, an asset and its corresponding anti-asset (that is, debt) are identical in every respect except that one is positive and the other is negative. Like matter and anti-matter, an asset and anti-asset combine to cancel each other out, that is, they annihilate each other.
Just as the laws of physics apply equally to matter and anti-matter, the laws of tax should apply equally to assets and anti-assets. The rule that the donee reports the gain should apply regardless of whether the donor transfers an asset or assumes an anti-asset.
3 Green Bag 2d 375-379 (2000)
Scholarly Commons Citation
Cohen, Stephen B., "The Tax of Physics, the Physics of Tax" (2000). Georgetown Law Faculty Publications and Other Works. Paper 933.