When Does Life Begin for Tax Purposes?

Abstract:     
I have written before about what I call "tax myopia" - the tax law's failure to consider insights from other areas of law that would inform the tax debate. (Tax Myopia, 13 Va. Tax Rev. 517 (1994); http://ssrn.com/abstract=799007). One illustration of this theme is how the tax law has ignored insights from other areas of law on perhaps the dominant social issue of our time: when does human life begin? The question was addressed in two tax cases decided over 55 years ago, and then revisited recently.

Although Wilson v. Commissioner, 41 B.T.A. 456 (1940), refused to treat an unborn child as a person for purposes of the income tax dependency exemption, Faulkner v. Commissioner, 41 B.T.A. 875 (1940), treated as unborn child as a person for purposes of the gift tax annual exclusion. The Board of Tax Appeals justified the different results on the ground that the dependency exemption benefitted the parents while the annual exclusion benefitted the unborn child. In subsequent rulings, the Service has rejected this distinction and refused to treat unborn children as persons for both income tax and gift tax purposes. In Cassman v. United States, 31 Fed. Cl. 121 (1994), the Court of Federal Claims recently denied the dependency exemption for an unborn child but accepted the Board's facile distinction permitting unborn children to be treated as persons for tax purposes where they benefit from that treatment. Cassman thus perpetuates the schizophrenic state of the tax law in this area and ignores both basic tax principles and nontax considerations in addressing this pivotal issue.

Number of Pages in PDF File: 6

Keywords: Tax, Abortion

JEL Classification: K34

Accepted Paper Series