Income - A discussion of what it is.

What is income?

Table of Contents

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Post 7

The following two table cells are an exchange of posts pulled from Trial Blogs:

As far as Irwin's lies on his credit application goes, that is always relevant to credibility AND his state of mind. Irwin certainly understood "income" when making the application.

Yes. He does understand income.

Do you?

And your definition of "INCOME" is....?
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Use extra lines if you need them.

jg said...

Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion.

See COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955) at www.findlaw.com/casecode/supreme.html
and the cases citing that case.

Anonymous said...
[That was me. I forgot to put my name in the proper space - Dale]

jg said...

Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion.

See COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955) at www.findlaw.com/casecode/supreme.html
and the cases citing that case.

10/07/2005 6:47 AM

The Supreme Court at footnote 11 in Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955) states:

"In discussing 61 (a) of the 1954 Code, the House Report states:

"This section corresponds to section 22 (a) of the 1939 Code. While the language in existing section 22 (a) has been simplified, the all-inclusive nature of statutory gross income has not been affected thereby. Section 61 (a) is as broad in scope as section 22 (a). "Section 61 (a) provides that gross income includes `all income from whatever source derived.' This definition is based upon the 16th Amendment and the word `income' is used in its constitutional sense." H. R. Rep. No. 1337, supra, note 10, at A18. A virtually identical statement appears in S. Rep. No. 1622, supra, note 10, at 168."

Q1. Is the word "income" used "in its constitutional sense in section 61(a)"?
The default answer is yes.

Q2. If the word "income" has a "constitutional sense" does the word income then also have a nonconstitutional sense?
The default answer is yes.

Visual representation of the above question for clarification of same2.9 kb gif
Links to this image:

In order, therefore, that the clauses cited from article 1 of the Constitution may have proper force and effect, save only as modified by the amendment, and that the latter also may have proper effect, it becomes essential to distinguish between what is and what is not 'INCOME,' as the term is there used, and to apply the distinction, as cases arise, according to truth and substance, without regard to form. Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.
Eisner v. Macomber, 252 U.S. 189 (1920)

Q3. Is the term or word "INCOME" defined anywhere within the Internal Revenue Code?
The default answer is no.

Q4. Is the reason that "INCOME" is not defined anywhere within the Internal Revenue Code because "Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution"
The default answer is yes.

Q5. Does "it becomes essential to distinguish between what is and what is not 'INCOME,' mean that not everything that comes in is income?
The default answer is yes.

There remains the question, strenuously argued, whether this gain in four years of over $700,000 on an investment of about $500,000 is 'income' within the meaning of the Sixteenth Amendment to the Constitution of the United States.
Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)

Q6. Is "income within the meaning of the Sixteenth Amendment to the Constitution" the same as "Income in its constitutional sense"?
The default answer is yes.

Q7. Is the "question" stated in Merchants v. Smietanka, a question of whether the "gain" stated is "income within the meaning of the Sixteenth Amendment"?
The default answer is yes.

Q8. Is the "question" stated in Merchants v. Smietanka, a question of whether the "gain" stated is "income within the meaning of the Sixteenth Amendment mean that not everything that comes in is income?
The default answer is yes.

Q9. Does this "question" also ask whether the "gain" stated is NOT "income within the meaning of the Sixteenth Amendment"?
The default answer is yes.

Visual representation of the above question for clarification of same 2.9 kb gif

We must reject in this case, as we have rejected in cases arising under the Corporation Excise Tax Act of 1909 (Doyle, Collector, v. Mitchell Brothers Co., and Hays, Collector, v. Gauley Mountain Coal Co., the broad content on submitted in behalf of the government that all receipts-everything that comes in-are income within the proper definition of the term 'gross income,' and that the entire proceeds of a conversion of capital assets, in whatever form and under whatever circumstances accomplished, should be treated as gross income...
Southern Pacific V. Lowe, 247 U.S. 330 (1918)

Q10. Is "everything that comes in is income" the concept being rejected?
The default answer is yes.

Q11. Does this mean not everything is "income in its constitutional sense"?
The default answer is yes.

Q12. Does this mean not everthing is "income within the meaning of the Sixteenth Amendment"?
The default answer is yes.

There remains the question, strenuously argued, whether this gain in four years of over $700,000 on an investment of about $500,000 is 'income' within the meaning of the Sixteenth Amendment to the Constitution of the United States.
The question is one of definition, and the answer to it may be found in recent decisions of this Court.
Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)

Q13. Does the above passage indicate that the definition of "income" is to be found in Supreme Court Cases?
The default answer is yes.

It is obvious that these decisions in principle rule the case at bar if the word 'income' has the same meaning in the Income Tax Act of 1913 that it had in the Corporation Excise Tax Act of 1909, and that it has the same scope of meaning was in effect decided in Southern Pacific Co. v. Lowe, where it was assumed for the purposes of decision that there was no difference in its meaning as used in the act of 1909 and in the Income Tax Act of 1913 (38 Stat. 114). There can be no doubt that the word must be given the same meaning and content in the Income Tax Acts of 1916 and 1917 that it had in the act of 1913. When to this we add that in Eisner v. Macomber, supra, a case arising under the same Income Tax Act of 1916 which is here involved, the definition of 'income' which was applied was adopted from Stratton's Independence v. Howbert, supra, arising under the Corporation Excise Tax Act of 1909, with the addition that it should include 'profit gained through sale or conversion of capital assets,' there would seem to be no room to doubt that the word must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court.
Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)

Q14. Does the court functionally state, "there was no difference in its meaning as used in the act of 1909 and in the Income Tax Act of 1913"?
The default answer is yes.

Q15. Does the court functionally state, "the word must be given the same meaning and content in the Income Tax Acts of 1916 and 1917 that it had in the act of 1913"?
The default answer is yes.

Q16. Is the meaning of the word income in EACH AND EVERY income tax act of Congress required to be THE SAME as the meaning used in the 1909 tax act with the noted additions?
The default answer is yes.

Q17. Does the addition to income of "profit gained through sale or conversion of capital assets" add in any way, the compensation for labor or services, or the pay of a worker, to the definition of "income"?
The default answer is no.

Working backwards through the string of cases dealing with the definition of "income":
1. Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)
2. Eisner v. Macomber, 252 U.S. 189 (1920)
3. Doyle v. Mitchell Bros. Co. , 247 U.S. 179 (1918)
4. Stratton's Independence, LTD. v. Howbert, 231 U.S. 399 (1913)
5. Flint v. Stone Tracy Co., 220 U.S. 107(1911)

This case presents the question whether, by virtue of the Sixteenth Amendment, Congress has the power to tax, as income of the stockholder and without apportionment, a stock dividend made lawfully and in good faith against profits accumulated by the corporation since March 1, 1913.
EISNER v. MACOMBER , 252 U.S. 189 (1920)

Q18. Does the Eisner case question whether a stock dividend is "income"?
The default answer is yes.

Q19. Is a stock dividend an act of or the result of "corporate activities"?
The default answer is yes.

After examining dictionaries in common use ... we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert; Doyle v. Mitchell Bros. Co), 'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case...
EISNER v. MACOMBER , 252 U.S. 189 (1920)

Q20. Does Eisner cite Stratton's in regard to "gain derived from capital, from labor, or from both combined"?
The default answer is yes.

Q21. Does Eisner cite Doyle in regard to "profit gained through a sale or conversion of capital assets"?
The default answer is yes.

The government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word 'gain,' which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. 'Derived-from- capital'; 'the gain-derived-from-capital,' etc. Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being 'derived'-that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal- that is income derived from property. Nothing else answers the description.
EISNER v. MACOMBER , 252 U.S. 189 (1920)

Q22. Does the "gain" in question, addressed in Eisner, happen to be the "gain" of a "CORPORATION"?
The default answer is yes.

Q23. Is this "income" itself "property"?
The default answer is yes.

Q24. Is a general tax on property a DIRECT TAX?
The default answer is yes.
Proof of this if challenged, will be made in a post just as long as this one.

This was an action to recover from the Collector additional taxes assessed against the respondent under the Corporation Excise Tax Act of August 5, 1909 (chapter 6, 36 Stat. 11, 112, 38), and paid under protest.

The facts are as follows: Plaintiff is a lumber manufacturing corporation which operates its own mills, manufactures into lumber therein its own stumpage, sells the lumber in the market, and from these sales and sales of various by-products makes its profits, declares its dividends, and creates its surplus.
Doyle v. Mitchell Bros. Co. , 247 U.S. 179 (1918)

Q25. Is Doyle a case in regard a CORPORATION and the corporation Excise Tax Act of August 5, 1909?
The default answer is yes.

An examination of these and other provisions of the act makes it plain that the legislative purpose was not to tax property as such, or the mere conversion of property, but to tax the conduct of the business of corporations organized for profit by a measure based upon the gainful returns from their business operations and property from the time the act took effect. As was pointed out in Flint v. Stone Tracy Co., the tax was imposed 'not upon the franchises of the corporation irrespective of their use in business, nor upon the property of the corporation, but upon the doing of corporate or insurance business and with respect to the carrying on thereof'; an exposition that has been consistently adhered to...

Selling for profit is too familiar a business transaction to permit us to suppose that it was intended to be omitted from consideration in an act for taxing the doing of business in corporate form upon the basis of the income received 'from all sources.'

Whatever difficulty there may be about a precise and scientific definition of 'income,' it imports, as used here, something entirely distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities. As was said in Stratton's Independence v. Howbert: 'Income may be defined as the gain derived from capital, from labor, or from both combined.'
Doyle v. Mitchell Bros. Co. , 247 U.S. 179 (1918)

Q26. Does Doyle tell us that the tax act of 1909 is "an act for taxing the doing of business in corporate form"?
The default answer is yes.

This action was brought in the district court of the United States by Stratton's Independence, Limited, a British corporation carrying on mining operations in the state of Colorado upon mining lands owned by itself, to recover certain moneys paid under protest for taxes assessed and levied for the years 1909 and 1910 under the provisions of the corporation tax act, being 38 of the act of August 5, 1909

As to what should be deemed 'income' within the meaning of 38, it of course need not be such an income as would have been taxable as such, for at that time (the 16th Amendment not having been as yet ratified) income was not taxable as such by Congress without apportionment according to population, and this tax was not so apportioned.

Evidently Congress adopted the income as the measure of the tax to be imposed with respect to the doing of business in corporate form because it desired that the excise should be imposed, approximately at least, with regard to the amount of benefit presumably derived by such corporations from the current operations of the government.

In Flint v. Stone Tracy Co., it was held that Congress, in exercising the right to tax a legitimate subject of taxation as a franchise or privilege, was not debarred by the Constitution from measuring the taxation by the total income, although derived in part from property which, considered by itself, was not taxable.

It was reasonable that Congress should fix upon gross income, without distinction as to source, as a convenient and sufficiently accurate index of the importance of the business transacted.
Stratton's Independence, LTD. v. Howbert, 231 U.S. 399 (1913)

Q27. Is the Stratton's case in regard to a corporation and the 1909 corporate excise tax act?
The default answer is yes.

Q28. Does the Stratton case address the concept of the definition of "income within the meaning of 38 such that "38" defines "INCOME"?
The default answer is yes.

Q29. Is "INCOME" the measure of the doing of business in corporate form?
The default answer is yes.

Q30. Prior to the 16th Amendment, was Congress allowed to use "INCOME" as the measure of the doing of business in the corporate form?
The default answer is yes.

Q31. Could it be reasonably said in the case of the tax act of 1909, that "INCOME" is an "accurate index of the importance of the business transacted"
The default answer is yes.

These cases involve the constitutional validity of 38 of the act of Congress approved August 5, 1909, known as 'the corporation tax' law.
Flint v. Stone Tracy Co., 220 U.S. 107(1911)

Q32. Can question 28 above now be restated as: "Does the Stratton case address the concept of the definition of "income within the meaning of 38 of the act of Congress approved August 5, 1909, known as 'the corporation tax' law such that "38 of the act of Congress approved August 5, 1909" is what defines "INCOME"?

Sec. 38. That every corporation, joint stock company, or association organized for profit and having a capital stock represented by shares, and every insurance company now or hereafter organized under the laws of the United States or of any state or territory of the United States, or under the acts of Congress applicable to Alaska or the District of Columbia, or now or hereafter organized under the laws of any foreign country, and engaged in business in any state or territory of the United States or in Alaska or in the District of Columbia, shall be subject to pay annually a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, or insurance company equivalent to one per centum upon the entire net income over and above five thousand dollars, received by it from all sources during such year, exclusive of amounts received by it as dividends upon stock of other corporations, joint stock companies or associations, or insurance companies subject to the tax hereby imposed; or, if organized under the laws of any foreign country, upon the amount of net income over and above five thousand dollars received by it from business transacted and capital invested within the United States and its territories, Alaska and the District of Columbia, during such year, exclusive of amounts so received by it as dividends upon stock of other corporations, joint stock companies or associations, or insurance companies subject to the tax hereby imposed.'
Flint v. Stone Tracy Co., 220 U.S. 107(1911)

Parsing the above:

Sec. 38. That every corporation, joint stock company, or association organized for profit and having a capital stock represented by shares... and engaged in business ... shall be subject to pay annually a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association ... equivalent to one per centum upon the entire net income over and above five thousand dollars, received by it from all sources during such year

A reading of this portion of the statute shows the purpose and design of Congress in its enactment and the subject-matter of its operation. It is at once apparent that its terms embrace corporations and joint stock companies or associations which are organized for profit, and have a capital stock represented by shares. Such joint stock companies, while differing somewhat from corporations, have many of their attributes and enjoy many of their privileges.
Flint v. Stone Tracy Co., 220 U.S. 107(1911)

Q33. Is it true that corporations and joint stock companies have profit (and loss)?
The default answer is yes.

Each and all of these, the statute declares, shall be subject to pay annually a special excise tax with respect to the carrying on and doing business by such corporation, joint stock company or association, or insurance company. The tax is to be equivalent to 1 per cent of the entire net income over and above $5,000 received by such corporation or company from all sources during the year, excluding, however, amounts received by them as dividends upon stock of other corporations, joint stock companies or associations, or insurance companies, subject to the tax imposed by the statute. Similar companies organized under the laws of any foreign country, and engaged in business in any state or territory of the United States, or in Alaska or the District of Columbia, are required to pay the tax upon the net income over and above $5,000 received by them from business transacted and capital invested within the United States, the territories, Alaska, and the District of Columbia, during each year, with the like exclusion as to amounts received by them as dividends upon stock of other corporations, joint stock companies or associations, or insurance companies, subject to the tax imposed.
Flint v. Stone Tracy Co., 220 U.S. 107(1911)

Q34. Does ANY definition in ANY case cited state that what a natural person receives in exchange for their labor is "income"?
The default answer is NO!

> "Does ANY definition in ANY case cited state that what a natural person receives in exchange for their labor is "income"?
The default answer is NO!"

You need to look to other cases that are later in time and also those that are in regard to an income tax.

All of the cases cited were from 1911-1921. Several of the cases were
in regard to the Corporate Tax Act of 1909 which is described in STRATTON'S INDEPENDENCE, LTD. v. HOWBERT, 231 U.S. 399 (1913) (by the words of the same justices, save one, that decided Flint v. Stone Tracy): "As has been repeatedly remarked, the corporation tax act of 1909 was not intended to be and is not, in any proper sense, an income tax law."

I will repeat my suggestion to read COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955) where it was said:

"Nor can we accept respondent's contention that a narrower reading of 22 (a) is required by the Court's characterization of income in Eisner v. Macomber, 252 U.S. 189, 207 , as "the gain derived from capital, from labor, or from both combined." The Court was there endeavoring to determine whether the distribution of a corporate stock dividend constituted a realized gain to the shareholder, or changed "only the form, not the essence," of his capital investment. Id., at 210. It was held that the taxpayer had "received nothing out of the company's assets for his separate use and benefit." Id., at 211. The distribution, therefore, was held not a taxable event. In that context - distinguishing gain from capital - the definition served a useful purpose. But it was not meant to provide a touchstone to all future gross income questions. Helvering v. Bruun, supra, at 468-469; United States v. Kirby Lumber Co., supra, at 3."

Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in 1955).

Let the reader understand what is going on here. The first thing to note is the question Mr. JG cited, but DID NOT ANSWER. Analysis of what he purports to be an answer will follow below.

The second thing to note, is that there are 34 NUMBERED QUESTIONS. Along with these 34 NUMBERED QUESTIONS are 34 DEFAULT ANSWERS.

And the third thing to note, is that NONE of the default answers were specifically challenged as being wrong.

It would make things too clear to state things like:
A1. agree
A2. deny
and so on.

> You need to look to other cases that are later in time and also those that are in regard to an income tax.

No Sir, I don't.

If you have a specific contrary proof, then post it, like you attempt to do with Glenshaw.

Since regardless of whether your side or my side is correct, the one purpose of the debate is to educate.

Hazy references to some thing somewhere that you allege contradicts my position neither contradicts my position, nor educates anyone.

Since you chose to quote my question 34 and its default answer, I am forced to assume that is the answer you purport to deny, since you have not clearly stated A34: deny. If you force me (and the readers/lurkers) to assume anything, you are practicing "obfuscation".

ob·fus·cate tr.v. ob·fus·cat·ed, ob·fus·cat·ing, ob·fus·cates. 1. To make so confused or opaque as to be difficult to perceive or understand: “A great effort was made . . . to obscure or obfuscate the truth” (Robert Conquest). 2. To render indistinct or dim; darken: The fog obfuscated the shore.
American Heritage Electronic Dictionary

Your conclusions, after citing a part of Glenshaw:

> Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in 1955).

Your conclusions do NOT contradict Question 34's default answer.

Q34. Does ANY definition in ANY case cited state that what a natural person receives in exchange for their labor is "income"?
The default answer is NO!

You purport to deny the answer to Q34, but you've made no substantive, solid connections to any facts that actually deny the answer. You make certain assumptions, and hold them out as facts. You make connections by insinuation, and hold them out as factual connections.

U.S. Supreme Court
COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955) 348 U.S. 426

COMMISSIONER OF INTERNAL REVENUE v. GLENSHAW GLASS CO.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT. *
No. 199.
Argued February 28, 1955.
Decided March 28, 1955.

Money received as exemplary damages for fraud or as the punitive two-thirds portion of a treble-damage antitrust recovery must be reported by a taxpayer as "gross income" under 22 (a) of the Internal Revenue Code of 1939. Pp. 427-433.

By a taxpayer. And a taxpayer is...?

(a) In determining what constitutes "gross income" as defined in 22 (a), effect must be given to the catchall language "gains or profits and income derived from any source whatever." Pp. 429-430.

Gains and profits from any source whatever, relating to CORPORATE privileges. Thus far (a) meshes with what I have brought forth in my prior post.

(b) Eisner v. Macomber, 252 U.S. 189 , distinguished. Pp. 430-431.

Eisner is about "invested personal property" and the income (gain or profit arising from corporate activities) derived from such "invested personal property". Such "invested personal property" is represented by "SHARES OF STOCK". Such "invested personal property"; such "shares of stock" ARE OWNERSHIP of a CORPORATION. In the Eisner case, the stock was split.

On January 1, 1916, the Standard Oil Company of California, a corporation of that state, out of an authorized capital stock of $100,000, 000, had shares of stock outstanding, par value $100 each, amounting in round figures to $50,000,000. In addition, it had surplus and undivided profits invested in plant, property, and business and required for the purposes of the corporation, amounting to about $45,000,000, of which about $20,000,000 had been earned prior to March 1, 1913, the balance thereafter.
EISNER v. MACOMBER , 252 U.S. 189 (1920)

(c) The mere fact that such payments are extracted from the wrongdoers as punishment for unlawful conduct cannot detract from their character as taxable income to the recipients. P. 431.

And the recipients in this case are...? (see below)

(d) A different result is not required by the fact that 22 (a) was re-enacted without change after the Board of Tax Appeals had held punitive damages nontaxable in Highland Farms Corp., 42 B. T. A. 1314. Pp. 431-432.

Board of Tax Appeals means the present day "Tax Court". This Kangaroo "Tax Court" is NOT a real court. No matter what type of robes and fancy hats; no matter how you dress the players, "Tax Court is NOT, Nor will ever be a "Court". That is why the IRS can NOT bring suit against an alleged "taxpayer" in the Board of Tax Appeals. That is why the IRS cherry picks the tax court rulings they will use as precedent. That is why the IRS LIES every time they say "the courts have ruled" and they hold up Tax Court CRAP.

(e) The legislative history of the Internal Revenue Code of 1954 does not require a different result. The definition of gross income was simplified, but no effect upon its present broad scope was intended. P. 432.

"INCOME" is defined by the Constitution. "GROSS INCOME" is defined by Statute.

Gross income is to income as Fruit is to Apple.

Compare: "The definition of gross income was simplified" with Question 34 and its default answer which Mr. JG purports to answer by saying, "I will repeat my suggestion to read COMMISSIONER v. GLENSHAW"

(f) Punitive damages cannot be classified as gifts, nor do they come under any other exemption in the Code. P. 432.

Okay..... Still nothing to refute the default answer of Q34. Still nothing that proves ANY definition in ANY case cited exists that states that what a natural person receives in exchange for their labor is "income".

211 F.2d 928, reversed.

[ Footnote * ] Together with Commissioner of Internal Revenue v. William Goldman Theatres. Inc., which was a separate case decided by the Court of Appeals in the same opinion.

Solicitor General Sobeloff argued the cause for petitioner. With him on the brief were Assistant Attorney General Holland, Charles F. Barber, Ellis N. Slack and Melva M. Graney.

Max Swiren argued the cause for the Glenshaw Glass Company, respondent. With him on the brief were Sidney B. Gambill and Joseph D. Block.

Samuel H. Levy argued the cause for William Goldman Theatres, Inc., respondent. With him on the brief was Bernard Wolfman.

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.

This litigation involves two cases with independent factual backgrounds yet presenting the identical issue. The two cases were consolidated for argument before the Court of Appeals for the Third Circuit and were heard en banc. The common question is whether money received as exemplary damages for fraud or as the punitive two-thirds portion of a treble-damage antitrust recovery must be reported by a taxpayer as gross income under 22 (a) of the Internal Revenue Code of 1939. 1 In a single opinion, 211 F.2d 928, the Court of Appeals affirmed the Tax Court's separate rulings in favor of the taxpayers. 18 T. C. 860; 19 T. C. 637. Because of the frequent recurrence of the question and differing interpretations by the lower courts of this Court's decisions bearing upon the problem, we granted the Commissioner of Internal Revenue's ensuing petition for certiorari.

The facts of the cases were largely stipulated and are not in dispute. So far as pertinent they are as follows:

Commissioner v. Glenshaw Glass Co. - The Glenshaw Glass Company, a Pennsylvania corporation, manufactures glass bottles and containers. It was engaged in protracted litigation with the Hartford-Empire Company, which manufactures machinery of a character used by Glenshaw. Among the claims advanced by Glenshaw were demands for exemplary damages for fraud 2 and treble damages for injury to its business by reason of Hartford's violation of the federal antitrust laws. 3 In December, 1947, the parties concluded a settlement of all pending litigation, by which Hartford paid Glenshaw approximately $800,000. Through a method of allocation which was approved by the Tax Court, 18 T. C. 860, 870-872, and which is no longer in issue, it was ultimately determined that, of the total settlement, $324,529.94 represented payment of punitive damages for fraud and antitrust violations. Glenshaw did not report this portion of the settlement as income for the tax year involved. The Commissioner determined a deficiency claiming as taxable the entire sum less only deductible legal fees. As previously noted, the Tax Court and the Court of Appeals upheld the taxpayer.

Commissioner v. William Goldman Theatres, Inc. - William Goldman Theatres, Inc., a Delaware corporation operating motion picture houses in Pennsylvania, sued Loew's, Inc., alleging a violation of the federal antitrust laws and seeking treble damages. After a holding that a violation had occurred, William Goldman Theatres, Inc. v. Loew's, Inc., 150 F.2d 738, the case was remanded to the trial court for a determination of damages. It was found that Goldman had suffered a loss of profits equal to $125,000 and was entitled to treble damages in the sum of $375,000. William Goldman Theatres, Inc. v. Loew's, Inc., 69 F. Supp. 103, aff'd, 164 F.2d 1021, cert. denied, 334 U.S. 811 . Goldman reported only $125,000 of the recovery as gross income and claimed that the $250,000 balance constituted punitive damages and as such was not taxable. The Tax Court agreed, 19 T. C. 637, and the Court of Appeals, hearing this with the Glenshaw case, affirmed. 211 F.2d 928.

It is conceded by the respondents that there is no constitutional barrier to the imposition of a tax on punitive damages. Our question is one of statutory construction: are these payments comprehended by 22 (a)?

The sweeping scope of the controverted statute is readily apparent:

"SEC. 22. GROSS INCOME.

"(a) GENERAL DEFINITION. - `Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service . . . of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. . . ." (Emphasis added.) 4

Pay attention to the words used.

Quote: "`Gross income' includes gains, profits, and income [derived from] salaries, wages, or compensation for personal service"

NOT: "`Gross income' includes gains, profits, and income, [] salaries, wages, or compensation for personal service".

This Court has frequently stated that this language was used by Congress to exert in this field "the full measure of its taxing power." Helvering v. Clifford, 309 U.S. 331, 334 ; Helvering v. Midland Mutual Life Ins. Co., 300 U.S. 216, 223 ; Douglas v. Willcuts, 296 U.S. 1, 9 ; Irwin v. Gavit, 268 U.S. 161, 166 . Respondents contend that punitive damages, characterized as "windfalls" flowing from the culpable conduct of third parties, are not within the scope of the section. But Congress applied no limitations as to the source of taxable receipts, nor restrictive labels as to their nature. And the Court has given a liberal construction to this broad phraseology in recognition of the intention of Congress to tax all gains except those specifically exempted. Commissioner v. Jacobson, 336 U.S. 28, 49 ; Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 87 -91. Thus, the fortuitous gain accruing to a lessor by reason of the forfeiture of a lessee's improvements on the rented property was taxed in Helvering v. Bruun, 309 U.S. 461 . Cf. Robertson v. United States, 343 U.S. 711 ; Rutkin v. United States, 343 U.S. 130 ; United States v. Kirby Lumber Co., 284 U.S. 1 . Such decisions demonstrate that we cannot but ascribe content to the catchall provision of 22 (a), "gains or profits and income derived from any source whatever." The importance of that phrase has been too frequently recognized since its first appearance in the Revenue Act of 1913 5 to say now that it adds nothing to the meaning of "gross income."

Nothing in that passage proves that compensation for service is a "gain". Nothing in that passage proves that compensation for services is "INCOME".

Nor can we accept respondent's [that would be a corporate respondent] contention that a narrower reading of 22 (a) is required by the Court's characterization of income in Eisner v. Macomber, 252 U.S. 189, 207 , as "the gain derived from capital, from labor, or from both combined." [that would be the gain derived from corporate activities as Doyle makes clear] 6 The Court was there endeavoring to determine whether the distribution of a corporate stock dividend constituted a realized gain to the shareholder, or changed "only the form, not the essence," of his capital investment. Id., at 210. It was held that the taxpayer had "received nothing out of the company's assets for his separate use and benefit." Id., at 211. The distribution, therefore, was held not a taxable event. In that context - distinguishing gain from capital - the definition served a useful purpose. But it was not meant to provide a touchstone to all future gross income questions. Helvering v. Bruun, supra, at 468-469; United States v. Kirby Lumber Co., supra, at 3.

Key point: Taxable Event. As in the event of an exercise of excise (privilege) taxable activities, vs. activities done under Constitutional RIGHT, only taxable by direct-apportioned tax.

Here we have instances of undeniable accessions to wealth, clearly realized, and over which the taxpayers [corporate entities] have complete dominion. The mere fact that the payments were extracted from the wrongdoers as punishment for unlawful conduct cannot detract from their character as taxable income to the recipients [corporate entities]. Respondents [corporate entities] concede, as they must, that the recoveries are taxable to the extent that they compensate for damages actually incurred. It would be an anomaly that could not be justified in the absence of clear congressional intent to say that a recovery for actual damages is taxable but not the additional amount extracted as punishment for the same conduct which caused the injury. And we find no such evidence of intent to exempt these payments.

[corporate entities]

It is urged that re-enactment of 22 (a) without change since the Board of Tax Appeals held punitive damages nontaxable in Highland Farms Corp., 42 B. T. A. 1314, indicates congressional satisfaction with that holding. Re-enactment - particularly without the slightest affirmative indication that Congress ever had the Highland Farms decision before it - is an unreliable indicium at best. Helvering v. Wilshire Oil Co., 308 U.S. 90, 100 -101; Koshland v. Helvering, 298 U.S. 441, 447 . Moreover, the Commissioner promptly published his nonacquiescence in this portion of the Highland Farms holding 7 and has, before and since, consistently maintained the position that these receipts are taxable. 8 It therefore cannot be said with certitude that Congress intended to carve an exception out of 22 (a)'s pervasive coverage. Nor does the 1954 Code's 9 legislative history, with its reiteration of the proposition that statutory gross income is "all-inclusive," 10 give support to respondent's position. The definition of gross income has been simplified, but no effect upon its present broad scope was intended. 11 Certainly punitive damages cannot reasonably be classified as gifts, cf. Commissioner v. Jacobson, 336 U.S. 28, 47 -52, nor do they come under any other exemption provision in the Code. We would do violence to the plain meaning of the statute and restrict a clear legislative attempt to bring the taxing power to bear upon all receipts constitutionally taxable were we to say that the payments in question here are not gross income. See Helvering v. Midland Mutual Life Ins. Co., supra, at 223.

Further examination of the 1954 Code can be found here, which is actually cited by footnote 11 below where the CONSTITUTIONAL meaning of "INCOME" is acknowledged.

Reversed.

MR. JUSTICE DOUGLAS dissents.

MR. JUSTICE HARLAN took no part in the consideration or decision of this case.

Footnotes
[ Footnote 1 ] 53 Stat. 9, 53 Stat. 574, 26 U.S.C. 22 (a).

[ Footnote 2 ] For the bases of Glenshaw's claim for damages from fraud, see Shawkee Manufacturing Co. v. Hartford-Empire Co., 322 U.S. 271 ; Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 .

[ Footnote 3 ] See Hartford-Empire Co. v. United States, 323 U.S. 386, 324 U.S. 570.

[ Footnote 4 ] See note 1, supra.

[ Footnote 5 ] 38 Stat. 114, 167.

[ Footnote 6 ] The phrase was derived from Stratton's Independence, Ltd. v. Howbert, 231 U.S. 399, 415 , and Doyle v. Mitchell Bros. Co., 247 U.S. 179, 185 , two cases construing the Revenue Act of 1909, 36 Stat. 11, 112. Both taxpayers were "wasting asset" corporations, one being engaged in mining, the other in lumbering operations. The definition was applied by the Court to demonstrate a distinction between a return on capital and "a mere conversion of capital assets." Doyle v. Mitchell Bros. Co., supra, at 184. The question raised by the instant case is clearly distinguishable.

[ Footnote 7 ] 1941-1 Cum. Bull. 16.

[ Footnote 8 ] The long history of departmental rulings holding personal injury recoveries nontaxable on the theory that they roughly correspond to a return of capital cannot support exemption of punitive damages following injury to property. See 2 Cum. Bull. 71; I-1 Cum. Bull. 92, 93; VII-2 Cum. Bull. 123; 1954-1 Cum. Bull. 179, 180. Damages for personal injury are by definition compensatory only. Punitive damages, on the other hand, cannot be considered a restoration of capital for taxation purposes.

[ Footnote 9 ] 68A Stat. 3 et seq. Section 61 (a) of the Internal Revenue Code of 1954, 68A Stat. 17, is the successor to 22 (a) of the 1939 Code.

[ Footnote 10 ] H. R. Rep. No. 1337, 83d Cong., 2d Sess. A18; S. Rep. No. 1622, 83d Cong., 2d Sess. 168.

[ Footnote 11 ] In discussing 61 (a) of the 1954 Code, the House Report states:

"Section 61 (a) provides that gross income includes `all income from whatever source derived.' This definition is based upon the 16th Amendment and the word `income' is used in its constitutional sense." H. R. Rep. No. 1337, supra, note 10, at A18.

A virtually identical statement appears in S. Rep. No. 1622, supra, note 10, at 168.

I am disappointed that you chose to engage on another topic BEFORE you completed THIS DEBATE.

>Your conclusions, after citing a part of Glenshaw:

>> Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

>> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in 1955).

> Your conclusions do NOT contradict Question 34's default answer.

It was my intention to neither confirm nor deny your “Question”. The discussion began when you asked for a definition of income; to which the cite COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955) was provided.

Read, again, from the Glenshaw Glass case:

The sweeping scope of the controverted statute is readily apparent:

"SEC. 22. GROSS INCOME.

"(a) GENERAL DEFINITION. - `Gross income' includes gains, profits, and [income derived from salaries, wages, or compensation for personal service . . . of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and] income derived from any source whatever. . . ."

Gross income includes gains, profits and [ ] income derived from any source whatever.
In the [ ] is a list of some items that may be a source of income for a particular person.

> Pay attention to the words used.

> Quote: "`Gross income' includes gains, profits, and income [derived from] salaries, wages, or compensation for personal service"

> NOT: "`Gross income' includes gains, profits, and income, [] salaries, wages, or compensation for personal service".

Income is an accession to wealth. Income is derived from an item such as salary, wage, rent, interest, etc. The increase in my bank balance when my net paycheck is directly deposited is an accession to wealth that was derived from my salary. The amounts sent to the government as taxes withheld, payment of FICA and Medicare taxes, and the amount withheld and forwarded to the insurance company for my health insurance premium that were deducted from my gross paycheck are increases to my wealth (that were used to satisfy my obligations). My gross paycheck is an accession to wealth.

Of course, not all monies received are income subject to the income tax. For example, if my employer has me purchase an item for the company and includes the reimbursement in the same deposit as my net paycheck the amount that represents the reimbursement is not an accession to wealth. The reimbursement is a payment toward the liability of my employer when it was arranged that I would purchase the item and be repaid.

Respondents contend that punitive damages, characterized as "windfalls" flowing from the culpable conduct of third parties, are not within the scope of the section. But Congress applied no limitations as to the source of taxable receipts, nor restrictive labels as to their nature. And the Court has given a liberal construction to this broad phraseology in recognition of the intention of Congress to tax all gains except those specifically exempted.

Yes, not even for a corporate respondent was the Court willing to accept the contention that a narrow reading should limit income to be included in gross income to the definition from the Eisner case.

> Key point: Taxable Event. As in the event of an exercise of excise (privilege) taxable activities, vs. activities done under Constitutional RIGHT, only taxable by direct-apportioned tax.

Taxable event. As in the receipt of income that is subject to inclusion as gross income vs. other receipts that are not subject to the income tax.

Not all the items in the [ ] above are an exercise of privilege, to my knowledge. Receipt of income from “professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit” are all taxable events according to the definition from the statute; and are so recognized by the Court, without objection, in accordance with Congressional intent to tax all gains except those specifically exempted.

The Court (in Eisner) was there endeavoring to determine whether the distribution of a corporate stock dividend constituted a realized gain to the shareholder, or changed "only the form, not the essence," of his capital investment. Id., at 210. It was held that the taxpayer had "received nothing out of the company's assets for his separate use and benefit." Id., at 211. The distribution, therefore, was held not a taxable event. In that context - distinguishing gain from capital - the definition served a useful purpose. But it was not meant to provide a touchstone to all future gross income questions.

The fact that the distribution was a return of capital, similar to a repayment or reimbursement, made it not a taxable event as there was no gain, no profit and no accession to wealth.

>> Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

>> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in 1955).

>>Your conclusions, after citing a part of Glenshaw:

>>> Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

>>> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in 1955).

>> Your conclusions do NOT contradict Question 34's default answer.

> It was my intention to neither confirm nor deny your “Question”.

> The discussion began when you asked for a definition of income; to which the cite COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955) was provided.

Yes. That is the question that started this discussion. And that definition is incomplete. That definition does NOT address compensation for labor. After you submitted that definition, I submitted 34 questions, each focusing narrower and narrower on the issue that counts for all the Citizens of America. The last question, #34, is the crucial question. The last question is the one you cited and quoted when you replied to my 34 question post. That question is:

Q34. Does ANY definition in ANY case cited state that what a natural person receives in exchange for their labor is "income"?
The default answer is NO!

Quote:

"It was my intention to neither confirm nor deny your “Question”."

End quote

Which translates to it is not your intention to get to the factual evidence regarding compensation for labor and where it falls in relationship to the definition of "INCOME".

So the issue as I see it, you need to prove that compensation for labor is income, I'm going to prove that it is not.

> Read, again, from the Glenshaw Glass case:

> The sweeping scope of the controverted statute is readily apparent:

Sec. 7701. Definitions

(a) When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof -
(1) Person
The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
(2) Partnership and partner
The term "partnership" includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a trust or estate or a corporation; and the term "partner" includes a member in such a syndicate, group, pool, joint venture, or organization.
(3) Corporation
The term "corporation" includes associations, joint-stock companies, and insurance companies.

Your words:

"that may be a source of income for a particular person."

That is the question. WHICH particular person?

That "may be a source" as in might or might not be a source.

This is a minor point of you using words without understanding the meaning. Moving on to the major point:

> Read, again, from the Glenshaw Glass case:

> The sweeping scope of the controverted statute is readily apparent:

> Gross income includes gains, profits and [ ] income derived from any source whatever.
> In the [ ] is a list of some items that may be a source of income for a particular person.

Yes. You are 110% correct.

The problem with your argument is that you don't understand the words you are using.

What you have in your mind as your understanding IS NOT MY UNDERSTANDING.

In short, the liars that drafted this legalese took you in. You missed the subtlety.

If you are a cpa, which I suspect for a variety of reasons, you are simply going to be UNABLE to see this subtlety, because to do so starts to prove that my side is correct. Nevertheless, as a hard case, my attempt to educate you on this will also educate those that read this page. (26 page views already since I first posted this page's link on the blog)

As I said, The problem with your argument is that you don't understand the words you are using, specifically the word I have emphasized in bold underline text. Thus, I leave the same words from my previous post.

>> Pay attention to the words used.

>> Quote: "`Gross income' includes gains, profits, and income [derived from] salaries, wages, or compensation for personal service"

>> NOT: "`Gross income' includes gains, profits, and income, [] salaries, wages, or compensation for personal service".

Since you missed this the last time, I need to expand upon what is presented here. Let us start with a first approximation of the word "DERIVED" according to American Heritage Electronic Dictionary:

de·rive v. de·rived, de·riv·ing, de·rives. --tr. 1. To obtain or receive from a source. --intr. To issue from a source; originate.

Q35. Is the issue from a source the same as the source?
The default answer is no.

Bringing down my quote from the case and snipping the excessage to narrow the focus for study:

>> Quote: "`Gross income' includes income [derived from] compensation for personal service"

I then transform the sentence by substituting the equate found in American Heritage:

>> Quote: "`Gross income' includes income [obtained from] compensation for personal service"

Notwithstanding the crap posted in 7701(c) regarding the use of the word "includes" and "including", the root word of includes is "TO ENCLOSE". To enclose something is to surround it, as in a fence around a pasture. Either a horse is included within the boundaries enclosed by that fence, or the horse is not. In or out. There is no category of in between.

Likewise, "GROSS INCOME" includes, that is encloses, certain items. In or Out. There is no category of in between. Either an item is included or enclosed by the category named "GROSS INCOME" or an item is not.

Do not go past this point without answering question 36.

Edit note. As originally uploaded the above sentence had the wrong number.

Q36. Does gross income include compensation for personal service?
The default answer is no.

The reason the answer is no is because of the exact wording in the statute.

"`Gross income' includes income [derived from] compensation for personal service". NOT: "`Gross income' includes [] compensation for personal service".

If you fail to address the point of Q36, and possibly even if you do, It will get a special post just for that one topical point.

> Income is an accession to wealth. Income is derived from an item such as salary, wage, rent, interest, etc.

My emphasis.

Even your words agree with what I have posted above.

Your words: "Income is [derived from] an item such as..."

NOT your words: "Income is [] an item such as..."

Income derived from compensation for labor, is NOT the compensation for labor.

> The increase in my bank balance when my net paycheck is directly deposited is an accession to wealth that was derived from my salary.

NO! NO! NO!

What is directly deposited IS your salary. (Less that taken by IRS' fraud and misapplication of the very rules we are arguing.)

Do not go past this point without answering question 37, 38, & 39.

Q37. Is your labor property?
The default answer is yes.

Q38. Is your money property?
The default answer is yes.

Q39. Is the conversion of property from one form to another form a taxable event?
The default answer is no.

The amounts sent to the government as taxes withheld, payment of FICA and Medicare taxes, and the amount withheld and forwarded to the insurance company for my health insurance premium that were deducted from my gross paycheck are increases to my wealth (that were used to satisfy my obligations). My gross paycheck is an accession to wealth.

I can not state this any simpler than I already have:

Income derived from compensation for labor, is NOT the compensation for labor.

Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being 'derived'-that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal- that is income derived from property. Nothing else answers the description.
EISNER v. MACOMBER , 252 U.S. 189 (1920)

Or in other words: "something of exchangeable value, proceeding from the property, severed from the property". What part of your net pay is the 'capital', what part of your net pay is the 'income" or 'gain'?

Q40. Please explain how you can sever the gain derived from your compensation for labor FROM your compensation for labor.

Q41a. Is the tax on this ALLEGED accession to wealth a direct tax or an indirect tax?
Q41b. Is the tax on this ALLEGED accession to wealth an "excise" tax?

> Of course, not all monies received are income subject to the income tax.

I actually agree with that sentence. Where we differ is WHICH moneys?

> For example, if my employer has me purchase an item for the company and includes the reimbursement in the same deposit as my net paycheck the amount that represents the reimbursement is not an accession to wealth. The reimbursement is a payment toward the liability of my employer when it was arranged that I would purchase the item and be repaid.

Assertion. Red herring. Not worth the effort to type these three sentences telling you that I'm ignoring the red herring.

> <snip for brevity>

You are in error as to what is a "gain". I will develop that point in subsequent posts. For the moment I will make this comment upon your bolded words.

Key word: "taxable receipts". As compared to "NON-taxable receipts".

> Yes, not even for a corporate respondent was the Court willing to accept the contention that a narrow reading should limit income to be included in gross income to the definition from the Eisner case.

Nice spin. And meaningless. It is meaningless, because you have still NOT fully and properly defined exactly what "income" is. It's spin because you have ignored a long string of cases that all deal with what "income" is.

Again, I am calling you on your attempt to merge TWO DIFFERENT TERMS. Again I am telling you:

INCOME IS TO GROSS INCOME as APPLE IS TO FRUIT.

Income is a sub-category within the category of Gross Income.

>> Key point: Taxable Event. As in the event of an exercise of excise (privilege) taxable activities, vs. activities done under Constitutional RIGHT, only taxable by direct-apportioned tax.

> Taxable event. As in the receipt of income that is subject to inclusion as gross income vs. other receipts that are not subject to the income tax.

Yes! Exactly!

"it becomes essential to distinguish between what is and what is not 'INCOME,' as the term is there used,"
Eisner v. Macomber, 252 U.S. 189 (1920)

There remains the question, ... whether this gain ... is 'income' within the meaning of the Sixteenth Amendment to the Constitution of the United States.
Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)

> Not all the items in the [ ] above are an exercise of privilege, to my knowledge.

Q42. Are they then an exercise of RIGHTS?

> Receipt of income from “professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit” are all taxable events according to the definition from the statute; and are so recognized by the Court, without objection, in accordance with Congressional intent to tax all gains except those specifically exempted.

Emphasis mine.

Q43. Is the event being taxed, or is the income being taxed?

This discussion is NOT a gross income question. This discussion is an INCOME discussion.
So for the third time:

INCOME IS TO GROSS INCOME as APPLE IS TO FRUIT.

> The fact that the distribution was a return of capital, similar to a repayment or reimbursement, made it not a taxable event as there was no gain, no profit and no accession to wealth.

>>> Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

>>> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in 1955).

You still have not proven that compensation for labor is INCOME.

> You still have not proven that compensation for labor is INCOME.

I was not attempting to do so. The topic that I was addressing is entitled: Possibly a discussion of the actual words of law? What is income?
You asked “What is income?” and you posted several Supreme court cases and seemed to assert that the definition of income is limited to that decided in Eisner : 'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets,..”

You do not seem to be willing to accept the clear language of the Court in Glenshaw Glass that the Eisner definition of income “was not meant to provide a touchstone to all future gross income questions”. Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in Glenshaw Glass).

Nonetheless, it appears you wish to discuss the inclusion of compensation for labor in gross income rather than the definition of income. We can do that.

> Q37. Is your labor property?
The default answer is yes.

> Q38. Is your money property?
The default answer is yes.

> Q39. Is the conversion of property from one form to another form a taxable event?
The default answer is no.

Whether or not the exchange of property from one form to another gives rise to inclusion in gross income, under the tax laws, does not have a default answer. Rather, it depends on the cost of the item I am giving as compared to the value of the item I receive (and whether or not I give or receive any consideration other than exchanging the properties). In general, if the item I get has greater value than what I paid for the item I give, there may indeed be income realized. Even if the item I give had a value equal to the value of the item I got, it is my cost and not the value of the item I give up that is used to calculate my gain or loss. Since the question was whether the exchange resulted in a taxable event, the rules above are the income tax rules

Examples:
1. If I buy 100 shares of Eastman Kodak for $200 and later sell the shares for cash when the value is $3 per share, the gain is measured by the $300 I get minus the $200 cost of the stock. Certainly, the value of the stock I gave was $300 when I got $300 cash. I now have $300 cash for what cost $200. I have income of $100. For tax purposes I have $300 of gross income and $100 of taxable income.

2. Rose has annual wages of $20,000. Rose does not get to deduct her personal expenses from her wage income. Rose has a zero cost, for tax purposes, in her labor. Rose has $20,000 of gross income minus deductions that are allowed to determine taxable income. If Rose has only a $4,000 standard deduction allowed, her taxable income is $16, 000 for the year.

Looking at the exchanges from an economic perspective may not give the same result as the tax rules.
In example 1 the stock at the time of sale was worth $300 and I received $300 in exchange for my stock. Did I actually gain wealth when considered from an economic perspective? No, because I had something worth $300 both before and after my sale of the stock. There was no accession to wealth in the economic sense.

In example 2, Rose exchanged her labor worth $20,000 per year for wages of $20,000. How do I know it was worth 20K? Because that was what her employer was willing to pay for the labor. Did Rose have an increase or accession in her wealth in an economic sense? No, she gave something worth 20K for 20K; but using the tax rules she has realized $20,000 more than her cost basis.

> Or in other words: "something of exchangeable value, proceeding from the property, severed from the property". What part of your net pay is the 'capital', what part of your net pay is the 'income" or 'gain'?

There is no capital investment on my part in providing services as an employee, according to the tax rules, so all of the earnings from my employment are income or gain. As mentioned, this may not be true in an economic sense nor may it be fair, just, proper, etc.; but what we are discussing, hopefully, are the actual words of the law.

> Q40. Please explain how you can sever the gain derived from your compensation for labor FROM your compensation for labor.

Income is an increase in wealth. In cases when I have no cost basis in the property being traded my increase in wealth is the same amount as the amount received. In cases when I have a cost basis in the item traded my increase in wealth is the difference between my cost and the amount received (either gain or loss).

> Q41a. Is the tax on this ALLEGED accession to wealth a direct tax or an indirect tax?

Indirect. See, for example, SPRINGER v. U S, 102 U.S. 586 (1880).

Hamilton left behind him a series of legal briefs, and among them one entitled 'Carriage tax.' See vol. vii. p. 848, of his works. This paper was evidently prepared with a view to the Hylton case, in which he appeared as one of the counsel for the United States. In it he says: 'What is the distinction between direct and indirect taxes? It is a matter of regret that terms so uncertain and vague in so important a point are to be found in the Constitution. We shall seek in vain for any antecedent settled legal meaning to the respective terms. There is none. We shall be as much at a loss to find any disposition of either which can satisfactorily determine the point.' There being many carriages in some of the States, and very few in others, he points out the preposterous consequences if such a tax be laid and collected on the principle of apportionment instead of the rule of uniformity. He insists that if the tax there in question was a direct tax, so would be a tax on ships, according to their tonnage. He suggests that the boundary line between direct and indirect taxes be settled by 'a species of arbitration,' and that direct taxes be held to be only 'capitation or poll taxes, and taxes on lands and buildings, and general assessments, whether on the whole property of individuals or on their whole real or personal estate. All else must, of necessity, be considered as indirect taxes.'

The tax here in question falls within neither of these categories. It is not a tax on the 'whole . . . personal estate' of the individual, but only on his income, gains, and profits during a year, which may have been but a small part of his personal estate, and in most cases would have been so. This classification lends no support to the argument of the plaintiff in error. <snip for brevity>

The question, what is a direct tax, is one exclusively in American jurisprudence. The text-writers of the country are in entire accord upon the subject.

Mr. Justice Story says all taxes are usually divided into two classes,- those which are direct and those which are indirect,-and that 'under the former denomination are included taxes on land or real property, and, under the latter, taxes on consumption.' 1 Const., sect. 950.

Chancellor Kent, speaking of the case of Hylton v. United States, says: 'The better opinion seemed to be that the direct taxes contemplated by the Constitution were only two; viz., a capitation or poll tax and a tax on land.' 1 Com. 257. See also Cooley, Taxation, p. 5, note 2; Pomeroy, Const. Law, 157; Sharswood's Blackstone, 308, note; Rawle, Const. 30; Sergenat, Const. 305.

We are not aware that any writer, since Hylton v. United States was decided, has expressed a view of the subject different from that of these authors.

Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or duty. Pomeroy, Const. Law, 177; Pacific Insurance Co. v. Soule, and Scholey v. Rew, supra.

> Q41b. Is the tax on this ALLEGED accession to wealth an "excise" tax?

Income taxes are in the class of excise taxes, according to the Supreme Court. (as stated above)
Please notice that the term excise is also used to describe an “excise tax” (such as the Corporate Tax Act of 1909 ruled on in Flint v. Stone Tracey) that is also in the class of excise taxes.

> Q42. Are they then an exercise of RIGHTS?

Perhaps they are, (does it matter?), but it is not relevant since the exercise of a right can be taxed.

> Q43. Is the event being taxed, or is the income being taxed?

The income tax is imposed on taxable income.

> INCOME IS TO GROSS INCOME as APPLE IS TO FRUIT.

> Income is a sub-category within the category of Gross Income.

Quite the contrary, gross income does not include all income.
Some income is not included in gross income. Have you not agreed to that?

>>> Of course, not all monies received are income subject to the income tax.

> I actually agree with that sentence. Where we differ is WHICH moneys?

If there is income not subject to the tax, i.e. not included in gross income, how can income be a subset of gross income?

> This discussion is NOT a gross income question. This discussion is an INCOME discussion.

Do you mean something like Possibly a discussion of the actual words of law? What is income?

>> You still have not proven that compensation for labor is INCOME.

> I was not attempting to do so. The topic that I was addressing is entitled: Possibly a discussion of the actual words of law? What is income?

Mr. G, This is disingenuous at best on your part. You are not a dummy. You have a respectable intellect. You know without saying, that since the entire argument is about whether compensation for labor is bona fide taxable, That is the issue that is the substrate for every discussion on the issue of taxes, and its related topics.

> You asked “What is income?” and you posted several Supreme court cases and seemed to assert that the definition of income is limited to that decided in Eisner : 'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets,..”

Yes. I did. Because the Supreme Court set the definition as the definition used in the 1909 Corporate tax act.

Before we look at ANY addition to that definition, we must look at what that definition is in the 1909 tax act.

The Merchant's v. Smietanka lists the line of Supreme Court cases that track us back to that original definition of income.

> You do not seem to be willing to accept the clear language of the Court in Glenshaw Glass that the Eisner definition of income “was not meant to provide a touchstone to all future gross income questions”. Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

Emphasis mine.

Sec. 61 from memory: ... Gross Income means all INCOME from whatever source derived...

Income becomes gross income.

Q44. Agree / Disagree?

> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in Glenshaw Glass).

Okay.

This does not prove that compensation for labor is "INCOME".

> Nonetheless, it appears you wish to discuss the inclusion of compensation for labor in gross income rather than the definition of income. We can do that.

Here is where words get slippery. I can read your sentence in one of two ways, parsed for illustration:

A: '... it appears you wish to discuss the inclusion of compensation for labor in gross income rather than the inclusion of compensation for labor in the definition of income.'

B: '... it appears you wish to discuss gross income rather than the definition of INCOME.

Q45. Is compensation for labor "INCOME" as defined, "in the constitutional sense"?

>> Q37. Is your labor property?
The default answer is yes.

>> Q38. Is your money property?
The default answer is yes.

>> Q39. Is the conversion of property from one form to another form a taxable event?
The default answer is no.

> Whether or not the exchange of property from one form to another gives rise to inclusion in gross income, under the tax laws, does not have a default answer.

The word I used was "CONVERSION".

> Rather, it depends on the cost of the item I am giving as compared to the value of the item I receive (and whether or not I give or receive any consideration other than exchanging the properties).

You are getting into assertion here... And a few assumptions to boot.

> In general, if the item I get has greater value than what I paid for the item I give, there may indeed be income realized.

Q46. If a corporate auto repair shop purchases labor at $30/hour and sells it at the shop rate of $75/hour, what is the gain DERIVED from that labor by the auto repair shop (not including other overhead like lights, rent, tools, secretaries' labor, etc.)?

Q47 In other words, What is the fair market value of the labor the corporate auto shop just purchased?

Q48. Is contracting to exchange labor for property a RIGHT or a Privilege?

Q49. When labor (property) is exchanged for money (property), at $30/hour, what is the fair market value of that labor?

Q50. If the labor purchased at $30/hour by the shop is the shop's fair market value, how can the fair market value be any other price for the mechanic selling that labor?

> Even if the item I give had a value equal to the value of the item I got, it is my cost and not the value of the item I give up that is used to calculate my gain or loss.

Until you prove that compensation for labor is income, no such sophistry can be applied.
If compensation for labor is not INCOME, then it is not taxed. Period. Cite upon request.

Q45. Is compensation for labor "INCOME" as defined, "in the constitutional sense"?

Since the question was whether the exchange resulted in a taxable event, the rules above are the income tax rules.

Q51. Are you asserting that the exchange is NOT the taxable event?

Which rules above? I see no citation in this post.

> Examples:
> 1. If I buy 100 shares of Eastman Kodak for $200 and later sell the shares for cash when the value is $3 per share, the gain is measured by the $300 I get minus the $200 cost of the stock. Certainly, the value of the stock I gave was $300 when I got $300 cash. I now have $300 cash for what cost $200. I have income of $100. For tax purposes I have $300 of gross income and $100 of taxable income.

Agreed. You have income from CORPORATE ACTIVITIES. Agreed, such gain is "income" in the constitutional sense.

> 2. Rose has annual wages of $20,000.

For the new readers, Mr. G. is referring to his example from this discussion. By the way, Mr. G, That discussion is NOT finished. You made an assertion and dropped the post like a hot potato.

> Rose does not get to deduct her personal expenses from her wage income.

Assertion. Not worth pursuing.

> Rose has a zero cost, for tax purposes, in her labor.

Key words, "for tax purposes". In reality Rose does have cost for her labor. Food, shelter, clothing, medical...

> Rose has $20,000 of gross income minus deductions that are allowed to determine taxable income.

Emphasis MINE.

Rose DOES NOT HAVE $20,000 of INCOME.

At this point, I refuse to discuss this example of Rose until you finish the other discussion.

<snip>

> Looking at the exchanges from an economic perspective may not give the same result as the tax rules.

You have not proven the tax rules. You have only asserted. And you abandoned that discussion right at the point where your sacred ox was going to get gored.

<snip>

>> Or in other words: "something of exchangeable value, proceeding from the property, severed from the property". What part of your net pay is the 'capital', what part of your net pay is the 'income" or 'gain'?

> There is no capital investment on my part in providing services as an employee, according to the tax rules, so all of the earnings from my employment are income or gain. As mentioned, this may not be true in an economic sense nor may it be fair, just, proper, etc.; but what we are discussing, hopefully, are the actual words of the law.

You mean the words that were about to gore your ox here?

>> Q40. Please explain how you can sever the gain derived from your compensation for labor FROM your compensation for labor.

> Income is an increase in wealth.

Nope. And exchanging labor (property) for money (property) is not an increase in wealth.

When we have an agreeable working definition of wealth, we can chase this rabbit.

Be that as it may, It is not until the gain is realized that it becomes income.

The fundamental relation of 'capital' to 'income' has been much discussed by economists, the former being likened to the tree or the land, the latter to the fruit or the crop; the former depicted as a reservoir supplied from springs, the latter as the outlet stream, to be measured by its flow during a period of time. For the present purpose we require only a clear definition of the term 'income,' as used in common speech, in order to determine its meaning in the amendment, and, having formed also a correct judgment as to the nature of a stock dividend, we shall find it easy to decide the matter at issue.

After examining dictionaries in common use (Bouv. L. D.; Standard Dict.; Webster's Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert; Doyle v. Mitchell Bros. Co., 'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case.

Brief as it is, it indicates the characteristic and distinguishing attribute of income essential for a correct solution of the present controversy. The government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word 'gain,' which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. 'Derived-from- capital'; 'the gain-derived-from-capital,' etc. Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being 'derived'-that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal- that is income derived from property. Nothing else answers the description.

> In cases when I have no cost basis in the property being traded my increase in wealth is the same amount as the amount received. In cases when I have a cost basis in the item traded my increase in wealth is the difference between my cost and the amount received (either gain or loss).

I'm ignoring the above until a later date. It does nothing to prove compensation for services is, or is not, "income in the constitutional sense".

>> Q41a. Is the tax on this ALLEGED accession to wealth a direct tax or an indirect tax?

> Indirect. See, for example, SPRINGER v. U S, 102 U.S. 586 (1880).

<snip>

He suggests that the boundary line between direct and indirect taxes be settled by 'a species of arbitration,' and that direct taxes be held to be only 'capitation or poll taxes, and taxes on lands and buildings, and general assessments, whether on the whole property of individuals or on their whole real or personal estate. All else must, of necessity, be considered as indirect taxes.'

"General assessments". There's a clue there.

And what is the privilege being taxed?

The question, what is a direct tax, is one exclusively in American jurisprudence. The text-writers of the country are in entire accord upon the subject.

Is a tax on compensation for labor a tax on consumption?

<snip>

and that direct taxes be held to be ... and general assessments, whether on the whole property of individuals or on their whole real or personal estate.

>> Q41b. Is the tax on this ALLEGED accession to wealth an "excise" tax?

> Income taxes are in the class of excise taxes, according to the Supreme Court. (as stated above)
Please notice that the term excise is also used to describe an “excise tax” (such as the Corporate Tax Act of 1909 ruled on in Flint v. Stone Tracey) that is also in the class of excise taxes.

Fine. This proves that compensation for labor is income exactly how?

>> Q42. Are they then an exercise of RIGHTS?

> Perhaps they are, (does it matter?), but it is not relevant since the exercise of a right can be taxed.

Yes. A right can be taxed BY THE RULE OF APPORTIONMENT.

And remember, to define "income" we MUST look at the definition of the 1909 corporate tax act.

FLINT v. STONE TRACY CO., 220 U.S. 107 (1911)

The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity, i. e., with the advantages which arise from corporate or quasi corporate organization; or, when applied to insurance companies, for doing the business of such companies. As was said in the Thomas Case, 192 U. S. supra, the requirement to pay such taxes involves the exercise of privileges, and the element of absolute and unavoidable demand is lacking. If business is not done in the manner described in the statute, no tax is payable.

>> Q43. Is the event being taxed, or is the income being taxed?

>The income tax is imposed on taxable income.

Q43A. Is that the event, or the property that is being taxed?

>> INCOME IS TO GROSS INCOME as APPLE IS TO FRUIT.

>> Income is a sub-category within the category of Gross Income.

> Quite the contrary, gross income does not include all income.

Sec. 61. Gross income defined

-STATUTE-
(a) General definition
Except as otherwise provided in this subtitle, gross income means
all income from whatever source derived,

Gross income MEANS all income except the excepted income. Gross income is the category, Income is the sub category.

> Some income is not included in gross income. Have you not agreed to that?

Doesn't matter, doesn't change the truth of the statement:

>> INCOME IS TO GROSS INCOME as APPLE IS TO FRUIT.

But since you think that because some income is not included, I'll continue with the analogy. Is a "road apple" a fruit?

>>>> Of course, not all monies received are income subject to the income tax.

>> I actually agree with that sentence. Where we differ is WHICH moneys?

> If there is income not subject to the tax, i.e. not included in gross income, how can income be a subset of gross income?

See above.

>> This discussion is NOT a gross income question. This discussion is an INCOME discussion.

> Do you mean something like Possibly a discussion of the actual words of law? What is income?

And you still have not proven that compensation for services is "INCOME"

Please continue here before addressing this page.

An article called "The concept of income for federal income tax purposes" by Olumide Obayemi, a Professor of Taxation Law at East Bay Law School in Oakland, California explains, better than I could, that the income tax taxes a realized accession to wealth but does not tax actual property.

http://www.sfbayview.com/101905/theconcept101905.shtml

Having actually taken the time to read the article you linked, I "ASSERT" that it does no better to support your position, than your own words do. (Assert is in quotes because I am cognizant that the assertion is presently unsupported.)

I am going to digress a moment, to publicly laud you for actually engaging in this debate, such as you have... And such as your engagement and points of argument are. And I want to say "Thank You" for doing so. Thank You.

I can see your intelligence at work (or if it's a group effort, the thinking ability of that group) as you attempt to rebut my points. You are NOT a stupid person.

I want you to understand that the above positive things I have just said about you are personal. I want them on the record first before I say the less positive things that I am going to say, because what follows can not be taken any way but personally. Though what follows is personal, I don't want it received as an ad hominem attack. From my perspective, I am just stating "facts" about you as I observe them. This is exactly as I stated the laudatory facts above.

Your intelligence and knowledge is skewed by your belief system. You are totally blind to yourself on this issue. You simply can not conceive, even in your imagination as a game of make-believe, that I could possibly be right and you could possibly be wrong. I state this based upon what points you respond to, and what points you ignore.

What this does do, is create a communication problem for us.

I wish to discuss the properties of the blue marble, and you don't see a blue marble. You don't even ask, "What blue marble?"

Now there is only one blue marble in the sand box. There are several dozen other marbles in the sand box, and not a one of them has any tinge of blue what so ever. I am forced to pick up each marble and say, "Is this a blue marble?" When you say, "No", I remove the marble from the sand box. In the end, the last marble I hold up will be blue... It should be interesting how you answer the question, "Is this marble blue?" when I hold up the last marble that is BLUE.

On now, to the process of holding up marbles and removing what is not blue.

This page contains 60 Yes/No questions that prove only corporations have income.

Thanks for your kind words.
Regards,
JG

Unknown to our readers, are the housekeeping exchanges in the background of our debate. The one above I am sharing with our readers.

It is not that my words are kind.
It is because you earned my respect.

We differ in opinions like black differs from white. The "kind" words are actually a response to YOUR kindness of sticking to the topic of our "fight" (discussion, argument, debate...).

I laud you because I will hold you up as an example to those on your side of the issue that do not have your honor. Kind words... No. Just an observation of my opponent.

I think we both expect the false truths to wash out of this debate leaving us with the truth.

So, with that said, here is Mr. G's latest post:

Although it is not clear how “income” is distinguishable from income; the 60 questions you presented do indeed show that only corporations have income subject to the income tax under the Corporate Tax Act of 1909 (which was the applicable statute in Stratton’s Independence, LTD. v. Howbert) and the act of Congress entitled, 'An Act to Provide Revenue, Equalize Duties, and Encourage the Industries of the United States, and for Other Purposes,' approved August 5, 1909 (which was the applicable statute in Doyle v. Mitchell Bros. Co. ). That is an entirely predictable result, given the intention of the legislatures enacting those laws, and one to which I am willing to stipulate.

The quote from Merchants’ Loan & Trust Co. v. Smietanka “there would seem to be no room to doubt that the word must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court.” appears to be the only basis for your conclusion that the applicability of the income tax, and the definition of income subject to the income tax is forever confined to the persons subject to those particular laws.

Are you concluding that the Court, when referring to “all of the Income Tax Acts of Congress”, was not referring only to the acts in existence at the time of the decision?

Do you have any basis for that reading other than your belief system or an inability to conceive that I could possibly be right and you could possibly be wrong? (We all, as humans, are bound to a degree by our experience so we are like the blind men describing that part of the elephant that is within our grasp.)

Are you implying, by your assertions, that it means (or are you adding to the actual language something that would make it mean) “all of the current and future Income Tax Acts of Congress”?
I do not accept that the Court was attempting to rule on the meaning of a statute not yet in existence.

A good summary of the cases in this period to which you have referenced to discuss the meaning and definition of income in regard to the income tax laws of that time is given in BOWERS v. KERBAUGH-EMPIRE CO. 271 U.S. 170 (1926):

(Editorial note: I'm making your citation of the following case green, in comparison to the pinkish color I have been using. That way the readers can tell the difference between what I pull out of a passage and what you have singled out from the following.)

“The Sixteenth Amendment declares that Congress shall have power to levy and collect taxes on income, 'from whatever source derived' without apportionment among the several states, and without regard to any census or enumeration. It was not the purpose or effect of that amendment to bring any new subject within the taxing power. Congress already had power to tax all incomes. But taxes on incomes from some sources had been held to be 'direct taxes' within the meaning of the constitutional requirement as to apportionment. Art. 1, 2, cl. 3, 9, cl. 4; Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601 , 15 S. Ct. 912. The Amendment relieved from that requirement and obliterated the distinction in that respect between taxes on income that are direct taxes and those that are not, and so put on the same basis all incomes 'from whatever source derived.' Brushaber v. Union Pac. R. R., 240 U.S. 1, 17 , 36 S. Ct. 236, 241 (60 L. Ed. 493, L. R. A. 1917D, 414, Ann. Cas. 1917B, 713). 'Income' has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909 (36 Stat. 112), in the Sixteenth Amendment, and in the various revenue acts subsequently passed. Southern Pacific Co. v. Lowe, 247 U.S. 330, 335 , 38 S. Ct. 540; Merchants' L. & T. Co. v. Smietanka, 255 U.S. 509, 219 , 41 S. Ct. 386, 15 A. L. R. 1305. After full consideration, this court declared that income may be defined as gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital. Stratton's Independence v. Howbert, 231 U.S. 399, 415 , 34 S. Ct. 136; Doyle v. Mitchell Brothers Co., 247 U.S. 179, 185 , 38 S. Ct. 467; Eisner v. Macomber, 252 U.S. 189, 207 , 40 S. Ct. 189, 9 A. L. R. 1570. And that definition has been adhered to and applied repeatedly. See, e. g., Merchants' L. & T. Co. v. Smietanka, supra, 518 (41 S. Ct. 386); Goodrich v. Edwards, 255 U.S. 527, 535 , 41 S. Ct. 390; United States v. Phellis, 257 U.S. 156, 169 , 42 S. Ct. 63; Miles v. Safe Deposit Co., 259 U.S. 247, 252 , 253 S., 42 S. Ct. 483; United States v. Supplee-Biddle Co., 265 U.S. 189, 194 , 44 S. Ct. 546; Irwin v. Gavit, 268 U.S. 161, 167 , 45 S. Ct. 475; Edwards v. Cuba Railroad, 268 U.S. 628, 633 , 45 S. Ct. 614. In determining what constitutes income substance rather than form is to be given controlling weight. Eisner v. Macomber, supra, 206 (40 S. Ct. 189).”

So, you are correct (and I am willing to stipulate) that the meaning of income according to the Supreme Court at that time was “gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital.”
Is compensation for labor, after allowable deductions, not gains derived from labor?

But, please note that the Court also said above :

And later:

'Income' has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909 (36 Stat. 112), in the Sixteenth Amendment, and in the various revenue acts subsequently passed.

Ending with:

“In determining what constitutes income substance rather than form is to be given controlling weight.”

Returning to a prior portion of our discussions:

> You do not seem to be willing to accept the clear language of the Court in Glenshaw Glass that the Eisner definition of income “was not meant to provide a touchstone to all future gross income questions”. Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."

> Emphasis mine. (i.e. Dale Eastman’s)

> Sec. 61 from memory: ... Gross Income means all INCOME from whatever source derived...
> Income becomes gross income.

> Q44. Agree / Disagree?

>> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in Glenshaw Glass).

> Okay.
> This does not prove that compensation for labor is "INCOME".

Gross income does not include all income. There is income, such as the return of capital, which is clearly not included in income subject to the income tax, according to the Supreme Court.

§ 61. Gross income defined
(a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.

(b) Cross references
For items specifically included in gross income, see part II (sec. 71 and following). For items specifically excluded from gross income, see part III (sec. 101 and following).

Included in the list of items in section 61 are several items for which it does not seem possible that a corporate entity could be the recipient, such as alimony and pensions. There are listed in section 101 through 140 many items of income that are specifically excluded from gross income.

Gross income is a less encompassing term than income. Income does not “become” gross income. Gross income is a subset of income within the meaning of the Sixteenth amendment.

Gross income means all undeniable accessions to wealth, clearly realized, and over which the recipient has complete dominion from whatever source derived except as otherwise provided in Title 26 Subtitle A.

If compensation for labor fits that definition it is income subject to the income tax, i.e. included in gross income.

This reply is fairly long. Please take the time to read it all the way through before starting to reply to it.

"Although it is not clear how “income” is distinguishable from income..."

I read that as a request to clarify the issue of distinguishing "income" from income. I've color coded the two, to emphasize that the sequence of letters I through E denote two different incomes as I and those on my side of the fence see it.

Bold, color, & brackets are my emphasis. This highlighting will continue from this point forward as it relates to determining what is "income" and what is "income".

This, IMO, is the issue that we have been tossing back and forth;

What is income, and what is income?

Although it is not clear how “income” is distinguishable from income; the 60 questions you presented do indeed show that only corporations have income subject to the income [income] tax under the Corporate Tax Act of 1909 (which was the applicable statute in Stratton’s Independence, LTD. v. Howbert) and the act of Congress entitled, 'An Act to Provide Revenue, Equalize Duties, and Encourage the Industries of the United States, and for Other Purposes,' approved August 5, 1909 (which was the applicable statute in Doyle v. Mitchell Bros. Co. ). That is an entirely predictable result, given the intention of the legislatures enacting those laws, and one to which I am willing to stipulate.

You correctly observe and point out that both the Doyle and the Stratton's case deal directly with the tax act of 1909. You correctly observe that according to the tax act of 1909 "that only corporations have income subject to the income [income] tax". Emphasis in red and brackets are mine, because the corporate income is NOT any other type of income. The proof of this is Flint v. Stone Tracy, which is another SCOTUS case directly dealing with the tax act of 1909.

The following were copied over from the 60 questions page, since it was already neatly formatted.

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

These cases involve the constitutional validity of 38 of the act of Congress approved August 5, 1909, known as 'the corporation tax' law.

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

In the present case the tax is not payable unless there be a carrying on or doing of business in the designated capacity, and this is made the occasion for the tax, measured by the standard prescribed. The difference between the acts is not merely nominal, but rests upon substantial differences between the mere ownership of property and the actual doing of business in a certain way.

That "doing of business in the designated capacity"; That "actual doing of business in a certain way" is the doing of business in the corporate form.

Doyle emphasizes this: " An examination of these and other provisions of the act makes it plain that the legislative purpose was not to tax property as such, or the mere conversion of property, but to tax the conduct of the business of corporations organized for profit by a measure based upon the gainful returns from their business operations and property from the time the act took effect."

And Doyle emphasizes also: "Whatever difficulty there may be about a precise and scientific definition of 'income,' it imports, as used here, something entirely distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities.

See questions Q56, Q57, & Q58 and their preceding citations of Doyle on the 60 questions page.

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity, i. e., with the advantages which arise from corporate or quasi corporate organization; or, when applied to insurance companies, for doing the business of such companies. As was said in the Thomas Case, supra, the requirement to pay such taxes involves the exercise of privileges, and the element of absolute and unavoidable demand is lacking. If business is not done in the manner described in the statute, no tax is payable.

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

In the case at bar we have already discussed the limitations which the Constitution imposes upon the right to levy excise taxes, and it could not be said, even if the principles of the 14th Amendment were applicable to the present case, that there is no substantial difference between the carrying on of business by the corporations taxed, and the same business when conducted by a private firm or individual.

Parsing the above by snipping the unhighlighted, and inserting ellipsis:

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

... and it could not be said, ... that there is no substantial difference between the carrying on of business by the corporations taxed, and the same business when conducted by a private firm or individual.

Double negatives cancel:

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

... and it could be said, ... that there is substantial difference between the carrying on of business by the corporations taxed, and the same business when conducted by a private firm or individual.

Is there a difference between a corporation on one hand, and a private firm or Natural Human on the other hand, when both are doing the same activities? The unrebuttable answer is yes. You just read it in a SCOTUS case.

Take for instance, a corporation digging in its dirt on its property and selling the gemstones found, and a natural person digging in his dirt on his property and selling the gemstones found.

The corporation has "income".
The Natural Person has "income".

I will amplify and expound upon this below, after we finish examining what SCOTUS had to say in Flint.

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

The thing taxed is not the mere dealing in merchandise, in which the actual transactions may be the same, whether conducted by individuals or corporations, but the tax is laid upon the privileges which exist in conducting business with the advantages which inhere in the corporate capacity of those taxed, and which are not enjoyed by private firms or individuals.

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

These advantages are obvious, and have led to the formation of such companies in nearly all branches of trade. The continuity of the business, without interruption by death or dissolution, the transfer of property interests by the disposition of shares of stock, the advantages of business controlled and managed by corporate directors, the general absence of individual liability, these and other things inhere in the advantages of business thus conducted, which do not exist when the same business is conducted by private individuals or partnerships. It is this distinctive privilege which is the subject of taxation, not the mere buying or selling or handling of goods, which may be the same, whether done by corporations or individuals.

I will amplify and expound upon this:

The corporation has "income".
The Natural Person has "income".

Please observe what SCOTUS says about "income" according to the tax act of 1909. Pay close attention to the reason given as to WHY the proceeds (monetary sale receipts) of the ore ARE "income":

Stratton’s Independence, LTD. v. Howbert, 231 U.S. 399 (1913)

'II. Are the proceeds of ores mined by a corporation from its own premises income within the meaning of the aforementioned act of Congress?
...

It seems to us that the first two questions certified must be answered in the affirmative principally for two reasons. First, because mining corporations are within the general description of 38, which comprises 'every corporation, joint stock company, or association organized for profit, and having a capital stock represented by shares , . . . and engaged in business in any state or territory of the United States;'

Is a reason the proceeds (money from the sale) of ores mined are income within the meaning of the 1909 tax act because the ores are being mined and sold by a corporation that is within the description of section 38 of the tax act of 1909? The answer is unrebuttably YES.

So; If a person (natural or corporate) is NOT "within the general description of 38" it is quite obvious that proceeds (money from the sale) of ores mined are NOT income within the meaning of the 1909 tax act.

Does the Natural person selling ores have (everything that comes in) dictionary "income". Yes. Without a doubt. Is this "income" 1909 tax act "income". No way!

And in order for my recap below to fit together properly, I need to emphasize this following point about the 1909 tax act "income":

Stratton’s Independence, LTD. v. Howbert, 231 U.S. 399 (1913)

As has been repeatedly remarked, the corporation tax act of 1909 was not intended to be and is not, in any proper sense, an income tax law.
...
The act of 1909 avoided this difficulty by imposing not an income tax, but an excise tax upon the conduct of business in a corporate capacity, measuring, however, the amount of tax by the income of the corporation, with certain qualifications prescribed by the act itself. Flint v. Stone Tracy

As of, and per this decision in 1913, was the corporation tax act NOT an income tax law? Unrebuttably, the answer is yes.

As of, and per this decision in 1913, was the corporation tax act NOT an income tax law? Unrebuttably, the answer is yes.

As of this decision in 1913, was the tax upon the conduct of business in a corporate capacity? Unrebuttably, the answer is yes.

As of this decision in 1913, was "income" merely the "measure" of the tax upon the conduct of business in a corporate capacity? Again, Unrebuttably, the answer is yes.

Stratton’s Independence, LTD. v. Howbert, 231 U.S. 399 (1913)

Evidently Congress adopted the income as the measure of the tax to be imposed with respect to the doing of business in corporate form because it desired that the excise should be imposed, approximately at least, with regard to the amount of benefit presumably derived by such corporations from the current operations of the government.

Again in Stratton's, we are told that "income" is a "measure" of the tax for the privilege of doing business in the corporate form.

Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

This tax, it is expressly stated, is to be equivalent to 1 per centum of the entire net income over and above $5,000 received from all sources during the year,-this is the measure of the tax explicitly adopted by the statute.

The income is not limited to such as is received from property used in the business, strictly speaking, but is expressly declared to be upon the entire net income above $5,000 from all sources, excluding the amounts received [already taxed -DE.].

In other words, the tax is imposed upon the doing of business of the character described, and the measure of the tax is to be income, with the deduction stated, received not only from property used in business, but from every source.

And we are told in Flint, that "income" is the "measure" of the tax on the doing of corporate business.

With the above expanded explanations in place, I can review and recap what the definition of income is.

What is this 1909 tax act definition of "income"?

Let us review:

If the entity is NOT a corporation listed in 38 of the 1909 tax act, then the entities' "income" is NOT "income".
If the entity is listed in 38 of the 1909 tax act, then "income" is the gain or increase from corporate activities.
The "income" is the measure of the importance of the corporate privilege. (corporate activities.)

So, according the definition of "income" as given in the tax act of 1909, and amplified in the Flint, and Stratton's cases, the "income" of a Natural Person is NOT "income" since 38 of the act does NOT include any Natural Person.

And according to the definition of "income" as given in the tax act of 1909, and amplified in the Flint, and Stratton's cases, the "income" of a Natural Person is NOT the gain or increase from corporate activities.

As amplified and further defined in the Flint and Stratton's cases, A Natural Person does NOT do business in the corporate form; A Natural Person does NOT do corporate activities; THEREFORE; A Natural Person's "income" would NOT be a measure of a tax on the privilege of the doing of corporate activities in the corporate form.

Thus, according to SCOTUS and the tax act of 1909:

Corporations have "income".
Natural Persons have "income".

I have covered this in great detail in response to your implied query: "Although it is not clear how “income” is distinguishable from income...". I hope it is clear to you now.

With this understanding of the difference between "income" and "income", we can now look to the other points you have missed.

I have been arguing consistently that "compensation for services" is not income. I need to revisit that argument briefly to clarify. "Compensation for personal services" is not income. However, "compensation for corporate services" IS income.

On now, to the rest of your post:

The quote from Merchants’ Loan & Trust Co. v. Smietanka “there would seem to be no room to doubt that the word must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court.” appears to be the only basis for your conclusion that the applicability of the income [income] tax, and the definition of income [income] subject to the income [income] tax is forever confined to the [corporate] persons subject to those particular laws.

Not the only basis. Please note my reply to your next question.

Are you concluding that the Court, when referring to “all of the Income [income] Tax Acts of Congress”, was not referring only to the acts in existence at the time of the decision?

Yes. Read the words as plainly stated for starters. Then I'll add some more support.

Review:

Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)

When to this we add that in Eisner v. Macomber, supra, a case arising under the same Income Tax Act of 1916 which is here involved, the definition of 'income' which was applied was adopted from Stratton's Independence v. Howbert, supra, arising under the Corporation Excise Tax Act of 1909, with the addition that it should include 'profit gained through sale or conversion of capital assets,' there would seem to be no room to doubt that the word must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court.

Is the meaning of the word "income" to be given the same meaning in ALL of the income tax acts of Congress?

"the word must be given the same meaning

in all of the Income Tax Acts of Congress"

You seek to quibble with me on this very plain statement.

The key word is ALL. I spell; ALPHA, LIMA, LIMA.

SCOTUS has just defined the word "income". And SCOTUS tells us; "what that meaning is has now become definitely settled by decisions of this Court".

Stare Decisis. Precedent on the meaning of the word "income" has been set. Since this truth collapses a whole bunch of what you believe into a nullity, I can understand why you would question this point.

So here's another cite that drives the point home. I don't want to cite the pertinent sentence out of context, and as shown below, if I post the context, I must make observation on such context.

Bear with me please, It does get to the point.

The following is in the order presented in the SCOTUS brief. I have only removed the numerical cites for readability, not that it matters since I link cite to findlaw. The only other modification is my interjected comments.

Eisner v. Macomber, 252 U.S. 189 (1920)

The Sixteenth Amendment must be construed in connection with the taxing clauses of the original Constitution and the effect attributed to them before the amendment was adopted.

In Pollock v. Farmers' Loan & Trust Co., under the Act of August 27, 1894, it was held that taxes upon rents and profits of real estate and upon returns from investments of personal property were in effect direct taxes upon the property from which such income arose, imposed by reason of ownership; and that Congress could not impose such taxes without apportioning them among the states according to population, as required by article 1, 2, cl. 3, and section 9, cl. 4, of the original Constitution.

"Income" is not given a color in this passage. "Income" was not "defined" by the tax act of 1909 as of the time of the Pollock case.

Eisner v. Macomber, 252 U.S. 189 (1920)

Afterwards, and evidently in recognition of the limitation upon the taxing power of Congress thus determined, the Sixteenth Amendment was adopted, in words lucidly expressing the object to be accomplished:

'The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.'

In this Eisner case, SCOTUS calls the Pollock case a "limitation" upon the taxing power. As I understand it, the Sixteenth Amendment was drafted in 1909, as was the tax act of 1909. The Sixteenth Amendment was "allegedly" ratified in 1913. An examination of the words of the Sixteenth Amendment shows it to be describing an "indirect" tax.

"Congress shall have the power to lay and collect taxes ... without apportionment among the several states." Is that not a description of an indirect tax?

"Congress shall have the power to lay and collect taxes ... without regard to any census or enumeration". Is that not a description of an indirect tax?

As shown above, only corporations have "income". Any tax upon a corporation is an "excise" tax. Excise taxes are "indirect" taxes.. This opens the door to discussion of what is a direct tax, what is an indirect tax, and what is an excise tax. I digress.

Eisner v. Macomber, 252 U.S. 189 (1920)

As repeatedly held, this did not extend the taxing power to new subjects, but merely removed the necessity which otherwise might exist for an apportionment among the states of taxes laid on income. Brushaber v. Union Pacific R. R. Co.; Stanton v. Baltic Mining Co.; Peck & Co. v. Lowe.

In other words, The Sixteenth Amendment did NOT remove the requirement of apportionment for any direct tax upon "income". Another debate with another polite individual allowed me to prove the point that

The Sixteenth Amendment DOES NOT ALLOW UNAPPORTIONED DIRECT TAXATION. Proof.

My assumption is that your next probe will be in regard to whether a tax on "income" is direct.

Eisner v. Macomber, 252 U.S. 189 (1920)

A proper regard for its genesis, as well as its very clear language, requires also that this amendment shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes upon property, real and personal. This limitation still has an appropriate and important function, and is not to be overridden by Congress or disregarded by the courts.

Why the Sixteenth does not apply to "income" is covered below.

Eisner v. Macomber, 252 U.S. 189 (1920)

In order, therefore, that the clauses cited from article 1 of the Constitution may have proper force and effect, save only as modified by the amendment, and that the latter also may have proper effect, it becomes essential to distinguish between what is and what is not 'income,' as the term is there used, and to apply the distinction, as cases arise, according to truth and substance, without regard to form. Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.

The last sentence supports the other SCOTUS case. The term "income" is now, by action of SCOTUS, a CONSTITUTIONALLY DEFINED term. Congress CAN NOT ALTER that meaning. And as SCOTUS said in Merchant's; "the word must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court."

The first sentence of the above paragraph tells us that there is "income" and that there is "income".

Simple logic tells us that if there is only "income" there would be no need to determine "what is and what is not 'income,'.

And please note, "as the term is there used" meaning the word income in the Sixteenth Amendment.

You are aware that neither income nor income are defined anywhere in the 7,000 pages of the IRC?

How can one define Gross X if one does not know what X is? How can one define Gross "income" if one does not know what "income" is?

The Sixteenth Amendment defined income. That definition of income is part of the Constitution now. That is why income is not defined in the IRC.

A few more comments upon Eisner.

Eisner v. Macomber, 252 U.S. 189 (1920)

In Pollock v. Farmers' Loan & Trust Co., under the Act of August 27, 1894, it was held that taxes upon rents and profits of real estate and upon returns from investments of personal property were in effect direct taxes upon the property from which such income arose, imposed by reason of ownership; and that Congress could not impose such taxes without apportioning them among the states according to population, as required by article 1, 2, cl. 3, and section 9, cl. 4, of the original Constitution.

Please take note of what was attempted to be taxed. Farmers Loan & Trust Co., A corporation, owned and held real estate.

FL&T owns real property. FL&T rents out this real property. FL&T gets paid rent receipts from the tenants and users of this real property. Pollock says a tax on this rent is a tax on the property, and such a tax is DIRECT. One of my views of a DIRECT tax, (and I can support the assertion with SCOTUS quotes) is that if you can not legally duck paying the tax, it's direct.

Something everybody overlooks. The rent from the property, is itself PROPERTY. If the rent is $10 per month. Then when that $10 is paid to the landlord, that $10 becomes the property of the landlord. And the 1894 tax was upon THAT PROPERTY. But I digress.

Now for comparison, let us look at a private, natural person that owns a like piece of real property. The natural person rents out their real property, and like FL&T, gets paid rent. The natural person gets paid rent receipts from the tenants and users of this real property.

The first comparison, is actually the entities involved. In one case a corporation or a "corporate" person; A "legal fiction". In the other case is a natural person.

The natural person exists, and natural persons predate government. The natural persons ARE the sovereigns. From the Declaration of Independence: 'governments are instituted among men, deriving their just powers from the consent of the governed.'

The corporation, on the other hand, is a creation of the state (government). It owes its existence to being created by the state. Its very existence is BY PRIVILEGE. Therefore, if a corporation owns property, it owns property BY PRIVILEGE.

The Natural Person, on the other hand, owns property BY RIGHT.

ANY tax upon a RIGHT is a DIRECT tax.

(Some will bring up the Hylton case in an attempt to refute me. Hylton was a bad decision, Jefferson (IIRC) said so. In the Hylton case, "LUXURY" is the "privilege" taxed by the excise.)

Any tax upon a RIGHT is an INFRINGEMENT upon that RIGHT, because once a thing is brought into the power of the legislature to tax, the amount is subject to legislative will. If a thing can be taxed at 1%, such a thing can be taxed at 100% (or more). If an event can be taxed at 1 cent per occurrence, such an event can be taxed at $10,000 per occurrence.

Coming back on point:
Corporation owns property.
Property is rented.
Rent receipts come to corporation.
Congress taxes this rent.
SCOTUS says this tax is direct.

The corporation also owns personal property (money). This money is invested. The return from this investment was taxed. SCOTUS said that a tax on this income is also a tax on the property it comes from. (The invested personal property(money)).

SCOTUS says Direct. End of tax laid without apportionment.

The only entity the Sixteenth Amendment actually acted upon, was the Supreme Court itself.

"there is no escape from the conclusion that the Amendment was drawn for the purpose of doing away for the future with the principle upon which the Pollock Case was decided;" -- Brushaber v. UPRR.

To fully understand what this passage is saying, one needs to understand that the court erred in Pollock by removing a tax, which, while upon a corporation's income, was an excise tax, by calling that tax a direct tax.

One also needs to understand, that such a tax on the 'income' of a Natural Person would still be a direct tax. The Sixteenth did not change the rule used in Pollock. It only changed the instance of when that rule is not allowed to be applied, and the time when that rule is not allowed to be applied is when a corporation or corporate privilege is involved.

Are you concluding that the Court, when referring to “all of the Income [income] Tax Acts of Congress”, was not referring only to the acts in existence at the time of the decision?

Do you have any basis for that reading other than your belief system or an inability to conceive that I could possibly be right and you could possibly be wrong?

<little snip>

Are you implying, by your assertions, that it means (or are you adding to the actual language something that would make it mean) “all of the current and future Income Tax Acts of Congress”?

No, I'm not implying, I'm stating outright, "INCOME" is constitutionally defined by those Supreme Court cases cited in the 60 questions page.

I do not accept that the Court was attempting to rule on the meaning of a statute not yet in existence.

You question my belief system. I am questioning your belief system. Let us compare those two belief systems.

Here's all the words in question from the Merchants’ Loan & Trust Co. v. Smietanka:

“there would seem to be no room to doubt that the word must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court.”

Specifically these words:
"the word must be given the same meaning in all of the Income Tax Acts of Congress"

Does this mean the word is NOT to be given the same meaning in ALL the tax acts?

To ask the question is to show there is only one answer.

Keep in mind the date of this court case. Findlaw cites it as 1921 which is at a minimum, seven (7) FULL years after the alleged ratification of the Sixteenth Amendment. At issue IS the meaning of THE term "INCOME" as used in the Sixteenth Amendment.

Proof of this point is an earlier passage of the Merchant's case.

Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)

The ground of the protest, and the argument for the plaintiff in error here, is that the sum charged as 'income' represented appreciation in the value of the capital assets of the estate which was not 'income' within the meaning of the Sixteenth Amendment, and therefore could not constitutionally be taxed, without apportionment, as required by section 2, clause 3, and by section 9, clause 4, of article 1 of the Constitution of the United States.

The issue, plain and simple, is the sum "income" as the term is defined for use "within the meaning of the Sixteenth Amendment".

Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)

There remains the question, strenuously argued, whether this gain in four years of over $700,000 on an investment of about $500,000 is 'income' within the meaning of the Sixteenth Amendment to the Constitution of the United States.

The question is one of definition, and the answer to it may be found in recent decisions of this Court.

The Corporation Excise Tax Act of August 5, 1909, was not an income tax law, but a definition of the word 'income' was so necessary in its administration that in an early case it was formulated...

As you can clearly see in the passage above, Sixteenth Amendment "income" is clearly, and unequivocally tied to the definition used in the tax act of 1909.

We have now come full circle.

I do not accept that the Court was attempting to rule on the meaning of a statute not yet in existence.

Which highlights in excellent contrast for our readers, how beliefs and cognitive filters operate. There is other minutia that will support my position, but I hold back on posting it because I like to keep to a "flow" of points, topics and thoughts that can be followed and understood without overwhelming ourselves or our audience.

It is a critical point for your side regarding the meaning of income. Because if my side is right, income can not be taxed without apportionment.

A good summary of the cases in this period to which you have referenced to discuss the meaning and definition of income in regard to the income tax laws of that time is given in BOWERS v. KERBAUGH-EMPIRE CO. 271 U.S. 170 (1926):

(Editorial note: I'm making your citation of the following case green, in comparison to the pinkish color I have been using. That way the readers can tell the difference between what I pull out of a passage and what you have singled out from the following.)

(Editorial note: Your cites from the case will still be in green. The case itself is black on gray, which I think enhances readability. I shall endeavor to put all your cites on the same background in future posts.)

Congress already had the power to tax a Natural Person's "income" subject to the rule of apportionment whether that "income" is from a Natural Person's labor, or that Natural Person's ownership of property.
Congress already had the power to tax a Corporate Person's "income" from doing business, subject to the rule of uniformity.
Congress already had the power to tax a Corporate Person's "income" derived from ownership of personal and real property, subject to the rule of apportionment.

BOWERS v. KERBAUGH-EMPIRE CO. 271 U.S. 170 (1926)

“The Sixteenth Amendment declares that Congress shall have power to levy and collect taxes on income, 'from whatever source derived' without apportionment among the several states, and without regard to any census or enumeration. It was not the purpose or effect of that amendment to bring any new subject within the taxing power. Congress already had power to tax all incomes. But taxes on incomes from some sources had been held to be 'direct taxes' within the meaning of the constitutional requirement as to apportionment. Art. 1, 2, cl. 3, 9, cl. 4; Pollock v. Farmers' Loan & Trust Co.

My comments directly above apply here also.

BOWERS v. KERBAUGH-EMPIRE CO. 271 U.S. 170 (1926)

The Amendment relieved from that requirement and obliterated the distinction in that respect between taxes on income that are direct taxes and those that are not, and so put on the same basis all incomes 'from whatever source derived.' Brushaber v. Union Pac. R. R.

That would be corporate "income" from the corporate business, as well as corporate "income" from ownership of property. That would also include shares of profits paid to stockholders who owned shares of the corporation by virtue of owning shares of stock of the corporation.

BOWERS v. KERBAUGH-EMPIRE CO. 271 U.S. 170 (1926)

'Income' has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909 (36 Stat. 112), in the Sixteenth Amendment, and in the various revenue acts subsequently passed. Southern Pacific Co. v. Lowe; Merchants' L. & T. Co. v. Smietanka.

The definition of "income" used in the Sixteenth Amendment is what ties ALL the tax acts of Congress together.

Quote:

Are you implying, ... that it means ... “all of the current and future Income Tax Acts of Congress”?

No, I'm not implying, I'm stating outright, "INCOME" is constitutionally defined by those Supreme Court cases cited in the 60 questions page.

BOWERS v. KERBAUGH-EMPIRE CO. 271 U.S. 170 (1926)

After full consideration, this court declared that income may be defined as gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital. Stratton's Independence v. Howbert; Doyle v. Mitchell Brothers Co.; Eisner v. Macomber.

Stratton's Independence:
This action was brought in the district court of the United States by Stratton's Independence, Limited, a British corporation carrying on mining operations in the state of Colorado upon mining lands owned by itself...

Mitchell Brothers Co.:
The facts are as follows: Plaintiff is a lumber manufacturing corporation which operates its own mills, manufactures into lumber therein its own stumpage, sells the lumber in the market, and from these sales and sales of various by-products makes its profits, declares its dividends, and creates its surplus.

Macomber:
This case presents the question whether, by virtue of the Sixteenth Amendment, Congress has the power to tax, as income of the stockholder and without apportionment, a stock dividend made lawfully and in good faith against profits accumulated by the corporation since March 1, 1913.

Kerbaugh-Empire Co.:
Defendant in error, a New York corporation... It owned all the capital stock of H. S. Kerbaugh, Incorporated...

So, you are correct (and I am willing to stipulate) that the meaning of income according to the Supreme Court at that time was “gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital.”

You have only stipulated to half the evidence. The gain is gain that arises from corporate activities, and the privileges exercised in doing such activities as a corporation.

Is compensation for labor, after allowable deductions, not gains derived from labor?

The above question will be copied below for detailed reply. The four paragraphs that follow, I remark upon, only by emphasizing the failure to observe which income is at issue, and since I addressed it in detail above, there is no need to rehash it.

Of course, Mr. G. can not be faulted for this failure to observe which income is at issue, since the issue wasn't laid out until after his first sentence questioned, and I replied in detail, as to the difference between [income] or [income].

But, please note that the Court also said above :

And later:

'Income' has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909 (36 Stat. 112), in the Sixteenth Amendment, and in the various revenue acts subsequently passed.

Ending with:

“In determining what constitutes income substance rather than form is to be given controlling weight.”

Returning to a prior portion of our discussions:

> You do not seem to be willing to accept the clear language of the Court in Glenshaw Glass that the Eisner definition of income “was not meant to provide a touchstone to all future gross income questions”. Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."
> Emphasis mine. (i.e. Dale Eastman’s)
(Emphasis changed to black for contrast.)

There is sophistry going on here, and I must call you on it.

"Income" is NOT "gross income" until it is made so by the execution of some law (like 61a). Until the application and execution of section 61(a), "income" is NOT "gross income".

Of issue is which "income" becomes gross income via section 61(a).
Does only "income" become "gross income" via section 61(a)?
Does only "income" become "gross income" via section 61(a)?
Or, Do both "income" and "income" become "gross income" via section 61(a)?

The answer is staring at you from footnote 11 of Glenshaw Glass, where it has been staring at you from the very beginning of this dialog.

COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955) at footnote 11:

"In discussing 61 (a) of the 1954 Code, the House Report states:

"This section corresponds to section 22 (a) of the 1939 Code. While the language in existing section 22 (a) has been simplified, the all-inclusive nature of statutory gross income has not been affected thereby.

Section 61 (a) is as broad in scope as section 22 (a).

"Section 61 (a) provides that gross income includes `all income from whatever source derived.' This definition is based upon the 16th Amendment and the word `income' is used in its constitutional sense." H. R. Rep. No. 1337, supra, note 10, at A18. A virtually identical statement appears in S. Rep. No. 1622, supra, note 10, at 168."

Remember from above, that "constitutional sense", that "16th Amendment definition", and that the definition used in the 1909 tax act ARE ALL THE SAME.

Scans of those House and Senate reports can be found on this page.

Returning to a prior portion of our discussions:

> You do not seem to be willing to accept the clear language of the Court in Glenshaw Glass that the Eisner definition of income “was not meant to provide a touchstone to all future gross income questions”. Clearly, the court rejected the argument for a definition limiting income to "the gain derived from capital, from labor, or from both combined."
> Emphasis mine. (i.e. Dale Eastman’s)
(Emphasis changed to black for contrast.)

There is a second sophistry going on here and I must call you on it also.

The only "limit" in regard to the definition of income is that it arises from corporate activities...
Be it gain or profit from the corporation's business; be it gain or profit from owning property not related to the corporation's business; be it gain or profit from selling unrelated or related capital property. In other words, NOTHING is limited as to what is income for a corporation so long as it is (corporate) gain.

>> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in Glenshaw Glass).

That's corporate recipient (at least according to the Supreme Court in Glenshaw Glass).

>> Income is an undeniable accession to wealth, clearly realized, and over which the recipient has complete dominion (at least according to the Supreme Court in Glenshaw Glass).

> Okay.
> This does not prove that compensation for labor is "INCOME".

Gross income does not include all income.

Non sequitur.
This does not prove that compensation for labor is "INCOME"

From your very citation of 61 below: "Except as otherwise provided"

Other than those exceptions, again from your very citation of 61:
"gross income means all income from whatever source derived"

"Gross income" is the main category or set. Income is the sub-category or sub-set.

There is income, such as the return of capital, which is clearly not included in income subject to the income [income] tax, according to the Supreme Court.

This is just another Non sequitur.
This does not prove that compensation for labor is "INCOME"

Then the return of capital is not income in any sense of the word, is it?

(b) Cross references
For items specifically included in gross income, see part II (sec. 71 and following). For items specifically excluded from gross income, see part III (sec. 101 and following).

Included in the list of items in section 61 are several items...

Yes, but several items of what?

The statute appears ambiguous on this point. The items could be items that are "sources of income (from whatever source)", items of receipt, items of income, items of income, or items of gross income.

Included in the list of items in section 61 are several items for which it does not seem possible that a corporate entity could be the recipient, such as alimony and pensions.

I agree.

The problem is that you are confusing "income" with "income".

Alimony is "income", NOT "income".
Pensions are "income", NOT "income".

...gross income means all income from whatever source derived, including (but not limited to) the following items:

There are two (2) functions going on in this phrase.

Gross income means all income from whatever source derived.
Gross income [also] includes (but [is] not limited to) the following items:

Included in the list of items in section 61 are several items for which it does not seem possible that a corporate entity could be the recipient, such as alimony and pensions.

Again, items of WHAT? We know that they are NOT items of "income", therefore, they DO NOT ENTER the category of "income", though they could be "income".

There are listed in section 101 through 140 many items of income that are specifically excluded from gross income.

You presume incorrectly. Quote: For items specifically excluded from gross income, see part III (sec. 101 and following).

The statute does NOT make the discernment that the items are "income" or "income".

Gross income is a less encompassing term than income.

Parsing the phrase from section 61(a) above to show what it actually does make into gross income contradicts your statement and shows its error:

Gross income means all income from whatever source derived.
Gross income means (but [is] not limited to) the following items:

Income does not “become” gross income.

Not until section 61(a) is applied. Then income becomes gross income.
Not until section 61(a) is applied. Then the "following items" become gross income.

Neither Constitutional income nor dictionary income becomes "STATUTORY" gross income UNTIL section 61 is applied.

Gross income is a subset of income within the meaning of the Sixteenth amendment.

Again with the naked assertions.... <exasperation>

Income within the meaning of the Sixteenth Amendment becomes gross income by way of the application of section 61(a).

Gross income means all undeniable accessions to wealth, clearly realized, and over which the recipient has complete dominion from whatever source derived except as otherwise provided in Title 26 Subtitle A.

Your statement/ assertion looks like a parse from COMMISSIONER v. GLENSHAW GLASS CO.

COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955).

Money received as exemplary damages for fraud or as the punitive two-thirds portion of a treble-damage antitrust recovery must be reported by a taxpayer as "gross income" under 22 (a) of the Internal Revenue Code of 1939. Pp. 427-433.

(a) In determining what constitutes "gross income" as defined in 22 (a), effect must be given to the catchall language "gains or profits and income derived from any source whatever." Pp. 429-430.

"income derived from any source whatever."

Income is in red because it is income in the Constitutional sense; because it is income as the term is used in the Sixteenth Amendment; because it is income as defined in the tax act of 1909.

Who is the "recipient" to which this accession to wealth was realized by?

COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955).

This litigation involves two cases with independent factual backgrounds yet presenting the identical issue. The two cases were consolidated for argument before the Court of Appeals for the Third Circuit and were heard en banc. The common question is whether money received as exemplary damages for fraud or as the punitive two-thirds portion of a treble-damage antitrust recovery must be reported by a taxpayer as gross income under 22 (a) of the Internal Revenue Code of 1939.
...
The facts of the cases were largely stipulated and are not in dispute. So far as pertinent they are as follows:

Commissioner v. Glenshaw Glass Co. - The Glenshaw Glass Company, a Pennsylvania corporation...
...
Commissioner v. William Goldman Theatres, Inc. - William Goldman Theatres, Inc., a Delaware corporation ...

Ah yes... Some corporations.

And of course, here's footnote 11 again.

Please note the date. 1955. Now please note this 1943 description of the 1939 tax act:

Page 2580 House Congressional Record March 27, 1943

The sixteenth amendment authorizes the taxation of income "from whatever source derived" -- thus taking in investment income --"without apportionment among the several States." The Supreme Court has held that the sixteenth amendment did not extend the taxing power of the United States to new or excepted subjects but merely removed the necessity which might otherwise exist for an apportionment among the States of taxes laid on income whether it be derived from one source or another. So the amendment made it possible to bring investment income within the scope of a general income-tax law, but did not change the character of the tax. It is still fundamentally an excise or duty with respect to the privilege of carrying on any activity or owning any property which produces income.

The income tax is, therefor, not a tax on income as such, It is an excise tax with respect to certain activities and privileges which is measured by reference to the income they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax.

Does the above look familiar? It should. It is a 1943 re-affirmation of the 1909 tax act definition of income as I have cited at length above, as used in the 1939 tax act, which the precursor tax act to the present 1954 (as amended in 1986) tax act.

Are you implying, by your assertions, that it means (or are you adding to the actual language something that would make it mean) “all of the current and future Income Tax Acts of Congress”?

No, I'm not implying, I'm stating outright, "INCOME" is constitutionally defined by those Supreme Court cases cited in the 60 questions page as supported by the documentation of the 1943 report.

The scan of page 2580 can be viewed here.

If compensation for labor fits that definition it is income subject to the income tax, i.e. included in gross income.

And yet another naked assertion.

If compensation for labor is listed as an item of gross income, then it is gross income...
If compensation for labor is NOT listed as an item of gross income, then it is NOT gross income.

Regardless, it is time to approach your last sentence above from another direction.

What exactly is being taxed when a natural person's compensation for labor is taxed?

I almost forgot this:

Is compensation for labor, after allowable deductions, not gains derived from labor?

No. (actually yes because of the way the question is worded.) Better still:
Compensation for labor is not a gain from that labor. It is "compensation" for the labor. It is an exchange of the value of time for the value of money.

Returning to what was missed in a prior post, please answer these questions to find the answer to your question.

Q. If a corporate auto repair shop purchases labor at $30/hour and sells it at the shop rate of $75/hour, what is the gain DERIVED from that labor by the auto repair shop corporation (not including other overhead like lights, building rental/ purchase, tools, secretaries' labor, etc.)?

Q. In other words, What is the fair market value of the labor the corporate auto shop just purchased?

Q. When labor (property) is exchanged for money (property), at $30/hour, what is the fair market value of that labor?

Q. If the labor purchased at $30/hour by the shop is the shop's fair market value, how can the fair market value be any other price for the mechanic selling that labor?

Q. Isn't the fair market value of the labor evidenced by the very contract to sell the labor?

U.S. Federal Income Tax

Possibly a discussion of the actual words of law?

What is income?

"the word must be given the same meaning

in all of the Income Tax Acts of Congress"