EISNER V. MACOMBER 252 US 189 (TAX)

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 profit accumulated by the corporation since March 1, 1913.

The Revenue Act of September 8, 1916 plainly evinces the purpose of the Congress to impose such taxes, and is to that extent in conflict with the Constitution.

These provisions of the Constitution necessarily limit the extension, by construction of the Sixteenth Amendment.

What is or what is not INCOME within the meaning of the Amendment must be determined in each case according to truth and substance, without regard to form.

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.

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.

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.