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1 © Steven J. Willis and UF College of Law 2007 All Rights Reserved I NTRODUCTION TO T AX S CHOOL Top 100 Cases Eisner v. Macomber, 252 U.S. 189 (1920)

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2 1 © Steven J. Willis and UF College of Law 2007 All Rights Reserved I NTRODUCTION TO T AX S CHOOL Top 100 Cases Eisner v. Macomber, 252 U.S. 189 (1920) I NTRODUCTION TO T AX S CHOOL Top 100 Cases Eisner v. Macomber, 252 U.S. 189 (1920) Edited Case Unedited Case Slides Top 100 Cases List Top 33 Doctrine List Edited Case Unedited Case Slides Top 100 Cases List Top 33 Doctrine List

3 2 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset.

4 3 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset.

5 4 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset.

6 5 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset.

7 6 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Remember: the 16 th Amendment in 1913 created the first unapportioned Constitutional Income Tax.

8 7 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset.

9 8 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset.

10 9 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset.

11 10 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This is a fascinating question. Today we have C corporations which are treated as separate entities and elective S corporations which are merely pass-through entities. Could, as some have proposed, Congress impose pass-through S status on all corporations? This is a fascinating question. Today we have C corporations which are treated as separate entities and elective S corporations which are merely pass-through entities. Could, as some have proposed, Congress impose pass-through S status on all corporations?

12 11 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This is a fascinating question. Today we have C corporations which are treated as separate entities and elective S corporations which are merely pass-through entities. Could, as some have proposed, Congress impose pass-through S status on all corporations? This is a fascinating question. Today we have C corporations which are treated as separate entities and elective S corporations which are merely pass-through entities. Could, as some have proposed, Congress impose pass-through S status on all corporations?

13 12 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This is a fascinating question. Today we have C corporations which are treated as separate entities and elective S corporations which are merely pass-through entities. Could Congress, as some have proposed, impose pass-through S status on all corporations? This is a fascinating question. Today we have C corporations which are treated as separate entities and elective S corporations which are merely pass-through entities. Could Congress, as some have proposed, impose pass-through S status on all corporations?

14 13 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset.

15 14 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!) This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!)

16 15 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!) This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!)

17 16 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!) This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!)

18 17 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!) This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!)

19 18 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!) This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!)

20 19 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!) This has the practical result of taxpayers not being taxed on the mere change in value of their property. For example: If you bought property for $200,000 in 1990, and today it is worth $500,000, you would not be taxed on the $300,000 increase until you sold or exchanged it (and maybe not even then!)

21 20 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. But, if this rule is of Constitutional importance, then how is the case consistent with current statutes such as §§ 1272 and 475, which impose tax on the changes in value of some financial instruments?

22 21 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. But, if this rule is of Constitutional importance, then how is the case consistent with current statutes such as §§ 1272 and 475, which impose tax on the changes in value of some financial instruments? Section 1272 involves Original Issue Discount Obligations.

23 22 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. But, if this rule is of Constitutional importance, then how is the case consistent with current statutes such as §§ 1272 and 475, which impose tax on the changes in value of some financial instruments? Section 475 involves mark-to-market rules imposed on broker/dealers of some securities.

24 23 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. Although this decision is quite old, you should read it carefully. It established some important principles about U.S. taxation after the adoption of the 16 th amendment. Whether the case is consistent with current law is also an appropriate question you should contemplate. For example: 1.it seems to recognize the separateness of corporations and shareholders to be of constitutional significance. 2.It seems to forbid – based on Constitutional language – a tax on mere appreciation in the value of an asset. So, if you’ve not yet read it...perhaps you should pause to do so now.

25 24 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it.

26 25 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it.

27 26 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. If you do not understand the difference between a stock dividend, a cash dividend, and a property dividend, perhaps you should read the case, which explains them well.

28 27 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. If you do not understand the difference between a stock dividend, a cash dividend, and a property dividend, perhaps you should read the case, which explains them well.

29 28 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. If you do not understand the difference between a stock dividend, a cash dividend, and a property dividend, perhaps you should read the case, which explains them well.

30 29 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. If you do not understand the difference between a stock dividend, a cash dividend, and a property dividend, perhaps you should read the case, which explains them well. A stock dividend occurs when a corporation issues its own shares to existing shareholders.

31 30 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. If you do not understand the difference between a stock dividend, a cash dividend, and a property dividend, perhaps you should read the case, which explains them well. A stock dividend occurs when a corporation issues its own shares to existing shareholders. So, if you owned 1000 shares, which was 10% of the corporation, a 20% stock dividend would result in you owning 1,200 shares – but still 10% of the total.

32 31 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. If you do not understand the difference between a stock dividend, a cash dividend, and a property dividend, perhaps you should read the case, which explains them well. A cash dividend occurs when a corporation issues cash to existing shareholders.

33 32 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. If you do not understand the difference between a stock dividend, a cash dividend, and a property dividend, perhaps you should read the case, which explains them well. A property dividend occurs when a corporation issues property (such as stock in a different company) to existing shareholders.

34 33 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it.

35 34 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it.

36 35 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it.

37 36 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. Recall the language of the 16 th Amendment: The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived....

38 37 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it.

39 38 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. In this case, the value represented by the stock dividend remained part of the stock. It was in not sufficiently separate.

40 39 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) Eisner v. Macomber is famous for several important propositions: –Stock Dividends are not income in a tax sense. –Mere appreciation in value is not income in a tax sense. –Corporations and Shareholders are treated as separate. –Income must be “derived” to be taxed. –“Derived” has an element of separateness to it. This is the most famous of the propositions.

41 40 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) The most famous language of the case is:

42 41 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) The most famous language of the case is: "Income may be defined as the gain derived from capital, from labor, or from both combined."

43 42 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) The most famous language of the case is: "Income may be defined as the gain derived from capital, from labor, or from both combined." The Court later 1955 decision in Commissioner v. Glenshaw Glass, 348 U.S. 426 (1955) limited the significance of this language. The Glenshaw Glass Court held that income could result from sources other than capital or labor. The Court later 1955 decision in Commissioner v. Glenshaw Glass, 348 U.S. 426 (1955) limited the significance of this language. The Glenshaw Glass Court held that income could result from sources other than capital or labor.

44 43 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) The most famous language of the case is: "Income may be defined as the gain derived from capital, from labor, or from both combined." The Court later 1955 decision in Commissioner v. Glenshaw Glass, 348 U.S. 426 (1955) limited the significance of this language. The Glenshaw Glass Court held that income could result from sources other than capital or labor. The Court later 1955 decision in Commissioner v. Glenshaw Glass, 348 U.S. 426 (1955) limited the significance of this language. The Glenshaw Glass Court held that income could result from sources other than capital or labor.

45 44 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) The most famous language of the case is: "Income may be defined as the gain derived from capital, from labor, or from both combined." The Court later 1955 decision in Commissioner v. Glenshaw Glass, 348 U.S. 426 (1955) limited the significance of this language. The Glenshaw Glass Court held that income could result from sources other than capital or labor. The Court later 1955 decision in Commissioner v. Glenshaw Glass, 348 U.S. 426 (1955) limited the significance of this language. The Glenshaw Glass Court held that income could result from sources other than capital or labor. This case is also on the top 100 list.

46 45 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before. FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before.

47 46 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before. FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before.

48 47 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before. FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before.

49 48 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before. FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before.

50 49 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before. FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before.

51 50 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before. FACTS: –TP owned 2200 shares of Standard Oil of California. –The company declared a 50% “stock dividend,” after which TP had 3300 shares. –18% of the new shares - with a par value of $19,877 - represented profits earned after 1913. ISSUE: –Are stock dividends income derived, as required for unapportioned taxation under the 16 th Amendment? HOLDING: –No. This merely represents the same proportional interest in the company, as the taxpayer owned before.

52 51 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) To summarize: –When you hear of “Eisner v. Macomber,” you should think of: Stock Dividends are not income in a tax sense. Mere appreciation in value is not income in a tax sense. Corporations and Shareholders are treated as separate. Income must be “derived” to be taxed. “Derived” has an element of separateness to it. –Right Doctrine –You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with –Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) –U.S. v. Lewis, 340 U.S. 590 (1951).

53 52 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) To summarize: –When you hear of “Eisner v. Macomber,” you should think of: Stock Dividends are not income in a tax sense. Mere appreciation in value is not income in a tax sense. Corporations and Shareholders are treated as separate. Income must be “derived” to be taxed. “Derived” has an element of separateness to it. –Right Doctrine –You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with –Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) –U.S. v. Lewis, 340 U.S. 590 (1951).

54 53 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) To summarize: –When you hear of “Eisner v. Macomber,” you should think of: Stock Dividends are not income in a tax sense. Mere appreciation in value is not income in a tax sense. Corporations and Shareholders are treated as separate. Income must be “derived” to be taxed. “Derived” has an element of separateness to it. –Right Doctrine –You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with –Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) –U.S. v. Lewis, 340 U.S. 590 (1951).

55 54 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) To summarize: –When you hear of “Eisner v. Macomber,” you should think of: Stock Dividends are not income in a tax sense. Mere appreciation in value is not income in a tax sense. Corporations and Shareholders are treated as separate. Income must be “derived” to be taxed. “Derived” has an element of separateness to it. –Right Doctrine –You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with –Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) –U.S. v. Lewis, 340 U.S. 590 (1951).

56 55 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) To summarize: –When you hear of “Eisner v. Macomber,” you should think of: Stock Dividends are not income in a tax sense. Mere appreciation in value is not income in a tax sense. Corporations and Shareholders are treated as separate. Income must be “derived” to be taxed. “Derived” has an element of separateness to it. –Right Doctrine –You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with –Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) –U.S. v. Lewis, 340 U.S. 590 (1951).

57 56 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) To summarize: –When you hear of “Eisner v. Macomber,” you should think of: Stock Dividends are not income in a tax sense. Mere appreciation in value is not income in a tax sense. Corporations and Shareholders are treated as separate. Income must be “derived” to be taxed. “Derived” has an element of separateness to it. –Right Doctrine –You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with –Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) –U.S. v. Lewis, 340 U.S. 590 (1951).

58 57 © Steven J. Willis and UF College of Law 2007 All Rights Reserved Eisner v. Macomber, 252 U.S. 189 (1920) To summarize: –When you hear of “Eisner v. Macomber,” you should think of: Stock Dividends are not income in a tax sense. Mere appreciation in value is not income in a tax sense. Corporations and Shareholders are treated as separate. Income must be “derived” to be taxed. “Derived” has an element of separateness to it. –Right Doctrine –You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with –Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) –U.S. v. Lewis, 340 U.S. 590 (1951).


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