Eisner v. Macomber
| Eisner v. Macomber | |
|---|---|
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| Argued April 16, 1919 Reargued October 17–20, 1919 Decided March 8, 1920 |
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| Full case name | Mark Eisner, as Collector of United States Internal Revenue for the Third District of the State of New York v. Myrtle H. Macomber |
| Citations | 252 U.S. 189 (more)
40 S. Ct. 189; 64 L. Ed. 521; 1920 U.S. LEXIS 1605; 1 U.S. Tax Cas. (CCH) P32; 3 A.F.T.R. (P-H) 3020; 1920-3 C.B. 25; 9 A.L.R. 1570
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| Prior history | Error to the District Court of the United States for the Southern District of New York |
| Holding | |
| A pro rata stock dividend where a shareholder received no actual cash or other property, and retained the same proportionate share of ownership of the corporation as was held prior to the dividend, was not taxable income to the shareholder within the meaning of the Sixteenth Amendment, and that an income tax imposed by the Revenue Act of 1916 on such dividend was unconstitutional, even where the dividend indirectly represented accrued earnings of the corporation. | |
| Court membership | |
| Case opinions | |
| Majority | Pitney, joined by White, McKenna, Van Devanter, McReynolds |
| Dissent | Holmes, joined by Day |
| Dissent | Brandeis, joined by Clarke |
| Laws applied | |
| U.S. Const. amend. XVI | |
Eisner v. Macomber, 252 U.S. 189 (1920), was a tax case before the United States Supreme Court. It is notable for the following holdings:
In 1895, the Supreme Court had held in Pollock that a tax from income on property (unlike a tax on income from employment or vocations) needed to be proportionate to state population. In 1913, the United States ratified the Sixteenth Amendment to the United States Constitution, which allowed taxation of income without regard to source (i.e., whether income from property or income from vocations and employment), and without regard to a state's population.
In 1918, the Court in Towne v. Eisner 245 U.S. 418 (1918) had addressed a nearly identical situation to one in Eisner v. Macomber. (Eisner was the person responsible for Internal Revenue Collection in both cases). However, in the aftermath of Towne v. Eisner, the U.S. Congress passed a revenue collection statute that specifically stated that stock dividends were to be counted as income.
Mrs. Macomber owned 2,200 shares in Standard Oil. Standard Oil declared a 50% stock dividend and she received 1,100 additional shares, of which about $20,000 in par value represented earnings accumulated by the company—recapitalized rather than distributed—since the effective date of the original tax law.
The current statute expressly included stock dividends in income, and the government contended that those certificates should be taxed as income to Mrs. Macomber as though the corporation had distributed money to her. Mrs. Macomber sued Mr. Mark Eisner, the Collector of Internal Revenue, for a refund.
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