Eisner, Internal Revenue Collector v. MacOmber

Citations

• 252 U.S. 189
• 64 L. Ed. 521
• 3 C.B. 25
• 40 S. Ct. 189
• 9 A.L.R. 1570
• 1920 U.S. LEXIS 1605
• 3 A.F.T.R. (P-H) 3020
• 1 U.S. Tax Cas. (CCH) 32

Syllabus

<p>Congress was not empowered by the Sixteenth Amendment to tax, as income of the stockholder, without apportionment, a stock dividend made lawfully and in' good faith against profits accumulated by the corporation since March 1,1913. P. 201. Toume v. Mmer, 245 U. S. 418.</p> <p>The Revenue Act of September 8, .1916, c. 463, 39 Stat. 756, .plainly evinces the purpose of Congress to impose such taxes and is to that . extent in conflict with Art. I, § 2, cl. 3, and Art. 1, § 9, cl. 4, of the Constitution. Pp. 199,217.</p> <p>These provisions of the Constitution necessarily limit the extension, by construction, of the Sixteenth Amendment. P. 205.</p> <p>What is or is not “income” within the meaning of the Amendment must be determined in each case according to truth and substance, without regard to form. P. 206.</p> <p>Income may be defined as the gain derived from capital, from labor, ■ or from both combined, including profit gained through sale or conversion of capital. P. 207.</p> <p>Mere growth or increment of value in a capital investment is not income; income is essentially a gain or profit .in itself of exchangeable value, proceeding from capital, severed from it, and derived or received by the taxpayer for his separate use, benefit and disposal. Id.</p> <p>A stock dividend — evincing merely a transfer of an accumulated surplus to the capital account of the corporation — takes nothing from ■the property of the corporation and adds nothing to that of the shareholder; a tax on such dividends is a tax on capital increase and not on income, and to be valid under the Constitution such taxes must be apportioned according to population in the several States. P. 208.</p>