- Zombies retain some living function, technically alive under US law, and ineligible for estate tax
- Unlike zombies, ghosts are considered dead and as such would be eligible for the estate tax
- Given their longevity, vampires have significant advantages with compounding interest
By Toby Fehily
You’re working late at the office when all of a sudden there’s a groan. For once, it isn’t coming from you.
So you investigate. Cautiously you creep towards the window, peek through the blinds and right there at the door, groaning and moaning and flailing its limbs, is a zombie. It wants your brains. More specifically it wants your brains for some advice about its tax obligations.
This might seem an improbable (or even impossible) scenario. For example, maybe you never stay at the office late. But the idea of providing tax advice to zombies is something that’s already being thought out — by Professor Adam Chodorow in his paper Death and Taxes and Zombies, which looked at what the undead’s dues would be under US tax law.
What started off for him as an idle thought — “I wonder if people who die and become zombies are dead for estate tax purposes,” he pondered — went on to become a popular paper shared across the internet, eventually garnering coverage in TIME, Forbes, New York Times and now Acuity.
“This was my ten minutes of internet fame and it didn’t involve a sex tape so I feel like I won,” Chodorow says.
What set Chodorow wondering is a duty imposed on the estates of the deceased in the US. As of this year, it only applies to people with more than US$5,340,000 in assets.
Thing is, your zombie client needn’t worry. As Chodorow writes in Death and Taxes and Zombies, most zombies retain some degree of both heart and brain function, making them technically alive under US law and thus ineligible for estate tax.
But by the same token, your zombie client would miss out on what is referred to as the basis reset, which in the US kicks in only when you really do die.
“Let’s pretend that you bought a car for $5,000 and when you die it’s worth $15,000,” Chodorow says as an example.
“If you sell it the day before you die, you pay tax on a $10,000 gain. Your basis is what you paid for your car. But in the United States, the way it works is that if you die and your heirs get your car, the basis is fair market value on the day you died, which is $15,000 in our example. In other words, the tax on appreciated property disappears on the day you die.”
This is not a problem for zombies who made bad investments. But without death and its accompanying basis reset, zombies with property that’s gone up in value might be hit by a bigger income tax bill.
What’s more, if your zombie client has transitioned into gainful employment there’ll be even more income tax to pay.
I wonder if people who die and become zombies are dead for estate tax purposes.
While researching zombie books and movies, Chodorow observed that some have had jobs as waiters, servants and labourers. Under the Thirteenth Amendment, they would have to be paid for this work and so would have to pay income tax on these earnings.
The only exception to this would be if they were on an internship program — a possibility that could improve the undead’s dubious work ethic and might represent an improvement on the current intern pool.
Those of you considering broadening your client base will be relieved to know that Chodorow doesn’t stop at just zombies. In Death and Taxes and Zombies, he makes mention of ghosts, who are uniquely placed in an unusually cruel tax situation.
Unlike zombies, ghosts are considered dead and as such would be eligible for the estate tax if their assets crossed the threshold. To make matters worse, ghosts with jobs — Chodorow mentions Professor Binns in Harry Potter and the Sorcerer’s Stone and Slimer in Ghostbusters 2 as examples — would owe income tax on those earnings too. Worst of all, Chodorow worries, is the fact that a ghost’s income could technically be classified as phantom income, wherein by definition the ghost would be taxed without even receiving the earnings.
A better tax option would be to become a vampire.
“Given their longevity,” Chodorow writes, “vampires would … have significant advantages with compounding interest and the tax deferral provided by individual retirement accounts and other tax-advantaged savings plans, such as whole life insurance.”
Plus they only work at night which means they’ll be paid penalty rates (and, as such, have more to spend on consultation fees).
There’s even a workaround for the basis reset they miss out on due to the fact they’re not considered completely dead: Chodorow recommends they give their appreciated property to their servants with the understanding that the servants will give it back in their wills.
Then, because they don’t age, the vampires can sit back and wait for the property’s return. Chodorow, however, does note that problems with gift tax might arise.
At this stage it’s worth thinking about that well-trodden saying: “Nothing is certain except for death and taxes.”
Maybe it’s time to update it. If zombies, ghosts and vampires one day rise to roam the world in search of accountants, then death isn’t really that certain after all.
At the very least though, thanks to Chodorow, we can still be pretty certain about the tax.
Toby Fehily is a freelance writer.
This article was first published in the February 2015 issue of Acuity magazine.