Anachronisms in Subchapter K of the Internal Revenue Code: Is It Time to Part with Section 736?
Postlewaite, Philip F., Rosenzweig, Adam H., Northwestern University Law Review
Brutus: Peace! Count the clock.
Cassius: The clock hath stricken three.
Trebonius: 'Tis time to part.
-William Shakespeare, The Tragedy of Julius Caesar1
On this occasion of the one-hundredth anniversary of the Northwestern University Law Review, the editorial board has called for a reflective view on the development of the law by its law school faculty. Appropriately, for purposes of this Essay, we have combined the divergent perspectives of two faculty members of the Tax Program at Northwestern University School of Law to scrutinize the evolution of a portion of tax law over the past fifty years. One of us, in the winter of his career, possesses a somewhat cynical view in light of his numerous years of teaching and writing in the field. The other, as a neophyte beginning his first year, brings an accompanying optimism.2 From this dual perspective, we do not address the evolution of the Code3 in its entirety (a daunting task even in its description), but rather anachronisms in the same. More specifically, we focus on section 736, a provision of Subchapter K of the Code, enacted originally in 1954 to settle the tax treatment of payments by a partnership to a retiring partner or to the successor of a deceased partner in liquidation of the partner's interest. Regardless that we approach section 736 from our divergent perspectives, the conclusion is the same: time has passed section 736 by, and, rather than serve its initial purpose, section 736 survives as an anachronism preventing the coherent evolution of the Code. Section 736 thus serves as a warning of the dangers inherent in the rise of anachronisms both in Subchapter K and the Code as a whole.
An anachronism is officially defined as "1: an error in chronology; esp: a chronological misplacing of persons, events, objects, or customs in regard to each other. 2: a person or a thing that is chronologically out of place; esp: one from a former age that is incongruous in the present."4 Regardless of where we encounter it-in the course of reading great literature or while surveying the Code-an anachronism should always give us pause, prompting us to ask: why is it there?5 To return to the literary reference that began this piece: did Shakespeare simply stumble in Grafting his plot, forgetting that clocks did not exist at the time of Caesar? Or, as we strongly suspect, did he have a higher purpose, perhaps to drive home the point that time stops for no person, regardless of position?6
Just as we scrutinize Shakespeare's intentions, in this Essay we speculate about the intentions of Congress (another kind of author) with its own great play of life (the Code) and that author's decision to retain statutory provisions in the Code that appear chronologically out of place. Do these provisions continue as a mere oversight or do they persist by design? If attributable to oversight, such Code provisions would be distressing enough from a tax policy standpoint in that subsequent statutory enactments should have called into question their continued vitality. Of greater concern, however, are those anachronisms that have been revisited and amended by Congress and yet remain in place. These anachronistic provisions are more perplexing because the obvious explanation for their existenceoversight-is less plausible.
As an example of this phenomenon, this Essay will evaluate section 736 of the Code, which unlike our reference to the clock by Brutus and Cassius, we assert is an example of the more indefensible type of anachronism.7 Not only has section 736's raison d'etre been fundamentally undermined by Congress as part of the continuing evolution of the statutory framework of the Code, but Congress has specifically revisited the provision and yet failed to integrate these new Congressional directives into the antiquated text.8 How could a provision such as section 736, with limited utility, devastating complexity, and confusing (at best) policy implications, remain in the Internal Revenue Code? …