The Story of Macomber: The Continuing Legacy of Realization
TAX STORIES: AN IN-DEPTH LOOK AT TEN LEADING FEDERAL INCOME TAX CASES, Foundation Press, 2009
43 Pages Posted: 24 Jun 2002 Last revised: 13 Jun 2012
Date Written: 2009
Since March 8, 1920, the day the decision was announced, Eisner v. Macomber has profoundly influenced the development of the income tax system. The key to its continuing importance lies in its constitutionally framed explication of realization, one of the most stable, and powerful, elements of an almost constantly changing income tax. By the time the Court (apparently) downgraded the realization requirement to mere administrative convenience, the case had already left its indelible mark on key elements of the income tax. Not only did it ensure that realization was deeply embedded in the system, but it also influenced several other important areas of taxation.
The chapter first analyzes the immediate reactions to the Macomber case, including the political furor it caused about judicial review. It next explains how the decision, including the political and constitutional concerns it raised, helped shape tax law in the areas of corporate taxation, capital gains, and exchanges of property in the years that followed. The chapter then traces the story of realization, examining both its decline and persistence. It concludes that Eisner v. Macomber and its reverberations continue to affect the tax code not just in the major areas previously mentioned but also by offering support for consumption tax provisions within the income tax.
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