"I assume that neither did because despite their advocacy for a market in organs, neither thought of Postrel as making a taxable transfer of wealth."

But surely the tax law does not apply a subjective test here? That is to say, I presume that neither one treated the kidney donation as a taxable event because the IRS does not consider it such, regardless of either woman's personal views of the matter.

Conversely, if the IRS did consider such a donation to be a taxable transfer, then presumably you would have to treat it as such if you were to donate a kidney, regardless of your personal beliefs.

The tax law isn't subjective, but people's understanding of it may be, and their subjective understanding can be revealing. Most taxpayers don't have an inborn knowledge of what constitutes a tax-relevant event; they either consult someone or take their best guess. For example, the average woman who has a stillborn baby won't know whether she can claim the baby or not -- hence the Google searches to this post, indicating that cautious taxpayers check before making the claim. But if she claims the stillborn baby, or even asks the question, that indicates that she is aware that one CAN claim children, and she thinks it is at least possible that her baby would count for this purpose.

I'm doubtful that either Postrel or Satel even asked the question of whether Postrel had made a taxable gift to Satel; I suspect that despite their advocacy for the monetization of organs, they did not conceive it as possible that the transfer was taxable. And under Prof. Maule's rule, whereby any item with even black market value is taxable, they should have paid tax on the gift.

Unlike Prof. Maule, I think that if something cannot legally be sold, it is unlikely to be taxable (with exceptions for fairly recently-made-illegal items like objects made from endangered species). If we just go by market value regardless of legality, sexually active couples theoretically are creating gross income from sex swaps, assuming that each could derive income from providing the same service on the open market.

I don't understand why taxation should affect the argument over legalized organ-selling one way or the other. If it is legal to sell your kidney, and you make a reasonable sum, say $10,000, why wouldn't you pay taxes on your earnings? Or is it just that any discussion of internal organs has to elicit the "ew, gross" response, regardless of logic?

I raise the issue specifically with reference to Postrel and Satel, who are advocates for a market in human transplant organs, yet who I am betting did not even consider paying a gift tax on the transfer between themselves.

Cave Robot says, "If it is legal to sell your kidney, and you make a reasonable sum, say $10,000, why wouldn't you pay taxes on your earnings?"

By that same token, if the kidney is estimated to be worth $13,000, and is given as a gift, why wouldn't either the giver or recipient pay gift tax for the kidney? There's a story today about a Starbucks barista who is giving a kidney to a frequent customer -- once there's a legal market in organs as freely transferable objects (like cars), why wouldn't one have to pay gift tax for a kidney as well as a Kia?