55 Pages Posted: 17 Apr 2015 Last revised: 31 Jan 2016

See all articles by Ethan Yale

Ethan Yale

University of Virginia School of Law

Date Written: January 2016


Anti-basis is the untaxed benefit enjoyed by a taxpayer when a liability or obligation is incurred. In the business context, the untaxed benefit is an increase in asset basis or a tax deduction. In the personal context, the untaxed benefit might take one of those forms, or it might be (nondeductible) personal consumption. A well-functioning income tax system must keep track of any such untaxed benefit. If the liability from which the benefit derived is avoided by the taxpayer, the prior untaxed benefit must be taken into income (or must reduce basis). If there was no prior untaxed benefit relating to a liability, exceptions are necessary to various rules requiring income recognition (or basis reduction) on discharge or shifting of liabilities.

Present law requires taxpayers to account for anti-basis, but it does so ad hoc. Various sections tacitly incorporate anti-basis - such as sections 108(e)(2), 357(c)(3), and the partnership definition of “liabilities” in regulation § 1.752-1(a)(4), to take just a few of the many examples - but each section exists on an island. A few prior commentators have sensed that a common underlying concept ties these rules together. Prior to this article, however, there has been no thorough investigation of this concept.

Suggested Citation

Yale, Ethan, Anti-Basis (January 2016). 94 North Carolina Law Review 485 (2016), Virginia Public Law and Legal Theory Research Paper No. 24, Virginia Law and Economics Research Paper No. 12, Available at SSRN: or

Ethan Yale (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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