WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW VOLUME 20 NUMBER 3 SUMMER 2020 NEW KID ON THE BLOCKCHAIN: USING BLOCKCHAIN TECHNOLOGY TO REFORM STEP-UP BASIS OF INHERITED ASSETS Andrew Bosserman 229 THE PORTAL TO INTERMEDIARY LIABILITY: MERGING SECONDARY LIABILITY WITH EQUITY AND PRIVATE INTERNATIONAL LAW Patrick Lin 250 BORN IN THE LAB, PROVEN IN THE MARKET: GATORADE'S IMPACT ON U.S. IP POLICY & RESEARCH INNOVATION Kyle Welch 277 ABOUT THE JOURNAL The WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW is a student organization sponsored by Wake Forest University School of Law dedicated to the examination of intellectual property in the legal context. Originally established as the Wake Forest Intellectual Property Law Journal in 2001, the new focus and form of the Journal, adopted in 2010, provides a forum for the exploration of business law and intellectual property issues generally, as well as the points of intersection between the two, primarily through the publication of legal scholarship. The Journal publishes four print issues annually. Additionally, the Journal sponsors an annual symposium dedicated to the implications of intellectual property law in a specific context. In 2009, the Journal launched an academic blog for the advancement of professional discourse on relevant issues, with content generated by both staff members and practitioners, which is open to comment from the legal community. The Journal’s student staff members are selected for membership based upon academic achievement, performance in an annual writing competition, or extensive experience in the field of intellectual property or business. The Journal invites the submission of legal scholarship in the form of articles, notes, comments, and empirical studies for publication in the Journal’s published print issues. Submissions are reviewed by the Manuscripts Editor, and decisions to extend offers of publication are made by the Board of Editors in conjunction with the Board of Advisors and the Faculty Advisors. The Board of Editors works closely and collaboratively with authors to prepare pieces for publication. Manuscript submissions should be accompanied by a cover letter and curriculum vitae, and may be sent electronically to [email protected] or by mail to: Manuscripts Editor Wake Forest Journal of Business and Intellectual Property Law Wake Forest University School of Law P.O. Box 7206 Reynolda Station Winston-Salem, North Carolina 27109 COPYRIGHT © 2020 WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW ISSN 2164-6937 (Print) ISSN 2164-6945 (Online) BOARD OF ADVISORS DANNY M. AWDEH JAMES L. LESTER Finnegan Henderson Farabow MacCord Mason PLLC Garrett & Dunner LLP Greensboro, North Carolina Washington, DC JUSTIN R. NIFONG CHARLES W. CALKINS NK Patent Law Kilpatrick Townsend & Stockton LLP Raleigh, North Carolina Winston-Salem, North Carolina MICHAEL S. MIRELES Professor, University of the KENNETH P. CARLSON Pacific, McGeorge School of Law Constangy, Brooks, Smith & Prophete LLP Sacramento, California Winston-Salem, North Carolina ALAN PALMITER Professor, Wake Forest TRIP COYNE University School of Law Ward & Smith, P.A. Winston-Salem, North Carolina Wilmington, North Carolina ABBY PERDUE RODRICK J. ENNS Associate Professor, Wake Forest Enns & Archer LLP University School of Law Winston-Salem, North Carolina Winston-Salem, North Carolina EDWARD R. ERGENZINGER, JR., COE W. RAMSEY PH.D. Brooks Pierce FisherBroyles, LLP Raleigh, North Carolina Raleigh, North Carolina T. ROBERT REHM, JR. JASON D. GARDNER Smith, Anderson, Blount, Kilpatrick Townsend & Stockton Dorsett, Mitchell, & Jernigan, LLP LLP Atlanta, Georgia Raleigh, North Carolina STEVEN GARDNER SIMONE ROSE Kilpatrick Townsend & Stockton, Professor, Wake Forest LLP University School of Law Winston-Salem, North Carolina Winston-Salem, North Carolina ROB HUNTER The Clearing House Payments Company, LLC Winston-Salem, North Carolina BARBARA LENTZ -Salem, North Carolina WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW Editor-in-Chief ANDREW J. BOSSERMAN Managing Editor ELISABETH K. POMEROY Business & Online Editor Manuscripts Editor OLIVIA BANE TIANNA LARSON Symposium Editor Executive Articles MAURICE O’NEAL GOLDSTON Editors MARISSA CASCIO Development Editor RYAN MADDEN DEMI B. BUSBY EMILIA TODD Senior Notes and Comments Editor Articles Editors GENTRY WARD CONNOR CHRISTENSEN Notes and Comments Editors MATTHEW J. JORDAN AUSTIN B. WOOD EVIN PILMAN ELLY K S K MATTHEW WRIGHT LOUIS J. HALLOW, III RACHEL F. ROBERTSON Research Editor SARAH TRAYNOR Editorial Staff MICHAEL C. CHAPEL BRITTENY JUNIOUS EDGAR SANTIAGO CHRISTOPHER CULBERT KRISTEN R. KOVACH EMILY THOMPSON ETHAN DRAPER BRIAN M. LEWIS JACKSON W. VOGEL EVAN G. FEDERICO CHRISTINE Y. MARTINEZ MATTHEW WALDREP ABBIE HORNBERGER COLE A. MIDDLETON HANNAH WEISS AARON E. JOHNSTON W. PARKS NOYES PHILLIP WERNER CAMERON B. RUSH Staff Members HUNTER ARTZ TONI-ANN HINES CHELSEY PHELPS KATHERINE BROCK JAMES HUGHES GRAHAM PITMAN AUSTIN S. COATES MONA IBADI HUNTER REVORD CARA COOK THOMAS JOA JENNIFER SCHAAF WILLIAM CROTTY DANIEL JOHNSON HANNAH SHOWS LAUREN CULVER HOLLY KOZAK JOHN M. STEVELINCK, JR. JAMESON DOUB RILEY E. MCMILLAN KYLE A. TATICH TIM DUNN SARAHAN MOSER ALYSSA VALDES WALKER HELMS JESSE OFFCHISS SIERRA WEINGARTNER J. KEENAN OSBORNE WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW VOLUME 20 SUMMER 2020 NUMBER 3 NEW KID ON THE BLOCKCHAIN: USING BLOCKCHAIN TECHNOLOGY TO REFORM STEP-UP BASIS OF INHERITED ASSETS Andrew Bosserman† I. INTRODUCTION ............................................................. 230 II. BACKGROUND .............................................................. 231 A. AN OVERVIEW OF STEP-UP BASIS ............................. 231 B. 1976 DISALLOWANCE OF STEP-UP BASIS AND SUBSEQUENT REPEAL IN 1981 .................................... 232 C. 2010 TEMPORARY CARRYOVER BASIS REGIME ........ 234 D. STEP-UP BASIS AND ESTATE TAX LAW SINCE 2010 . 235 E. AN OVERVIEW OF BLOCKCHAIN TECHNOLOGY ........ 235 III. ANALYSIS .................................................................... 238 A. ARGUMENTS SUPPORTING STEP-UP BASIS ARE NO LONGER SOUND .......................................................... 238 B. HOW BLOCKCHAIN COULD FACILITATE A CARRYOVER BASIS REGIME ........................................ 239 1. Real Estate ............................................................... 240 2. Financial Securities ................................................. 241 3. Artwork & Gemstones .............................................. 242 C. BUSINESS IMPACT OF USING BLOCKCHAIN TO REFORM STEP-UP BASIS ............................................. 243 1. Economic Efficiency ................................................ 243 2. Efficient Transfer of Assets Upon Death .................. 244 3. Increased Demand for Blockchain Solutions ........... 245 4. Disparate Impact on Low-Income Individuals ......... 246 IV. CONCLUSION .............................................................. 248 † © 2020 Andrew Bosserman is a third-year student at Wake Forest University School of Law and the Editor-in-Chief of the Wake Forest Journal of Business and Intellectual Property Law. Prior to law school, Andrew worked as an IRS aGent and as a CPA. He also owned and operated his own Christmas tree farm. Andrew has a B.S. in Business with majors in accountancy and finance from Miami University. After Graduation, Andrew plans to work as a tax attorney. 230 WAKE FOREST J. VOL. 20 BUS. & INTELL. PROP. L. I. INTRODUCTION Current tax law provides an outdated and inequitable preference to heirs who inherit appreciated assets, as compared to individuals who receive gifted assets during the donor’s lifetime. This tax preference, known as “step-up” basis, is expected to cost the United States government $105 billion in foregone tax revenue over the next ten years, not including all lost revenue from prior years.1 Individuals who receive gifted assets take the donor’s basis in the asset, also known as “carryover” basis.2 Contrastingly, heirs receive a “step-up” in the basis of an inherited asset to its fair market value, effectively exempting the asset’s appreciation during the decedent’s lifetime from income tax.3 Congress tested a carryover basis regime for inherited assets twice, in 19764 and in 2010.5 Due to changes in estate tax law and in technology, arguments against a carryover basis regime are no longer sound. Less than one estate out of every thousand is subject to the estate tax, resulting in minimal concerns about double taxation.6 Moreover, current technology permits easy tracking of the decedent’s basis. One such technology that could facilitate a carryover basis regime is blockchain. Blockchain’s “trustless” technology utilizing decentralized ledgers7 could track the basis of assets, making carryover basis for heirs easy to ascertain. Using blockchain to facilitate carryover basis would result in increased economic efficiency, increased ease of asset transfers upon death, and increased demand for blockchain solutions.8 First, this comment explores current step-up basis law, Congress’ prior attempts to establish a carryover basis regime, current estate tax law, and the basics of blockchain technology. Next, it will analyze why arguments against using carryover basis for inherited assets are no longer sound and how blockchain could facilitate a carryover basis regime. Finally, this comment will explore the business impact of using blockchain to reform step-up basis and the resulting economic