Revenue – primary goal

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Receipt of consumption – must be valued in terms equivalent to wealth, which is “elusive.” Control is less clear because taxpayer does not receive anything with exchangeable value.

  • U.S. v. Gotcher – paid-for trip to Germany to tour VW facilities. District court said that this is either not income or it’s a deductible business expense. Appeals Court says that is true for Mr. Gotcher (not income) but wife’s trip has to be included in husband’s income.

    • Tests – there must be an economic gain and it must benefit the taxpayer personally.

    • Dominant purpose of trip is critical inquiry.

    • Would have to show that wife made trip only to assist her husband in business.

    • N.B. §132 – fringe benefits – wasn’t in code at this time.

    • Realization – how to tax property that is not immediately consumed?

      • Our system requires a realization event before taxation. This creates a deferral of taxation. Question both WHEN and IF there is income.

      • Eisner v. Macomber – 1920 – can Congress tax stock dividends under the 16th Amendment? No. Plus dissents. Says gain must be severed from capital to constitute gain. Subsequent decisions have eroded severance requirement.

        • Helvering v. Hort – 1940 – realization requirement described as “administrative convenience” rather than Constitutionally grounded.

      • Cesarini v. U.S. – 1969 – money found in piano. Treasure trove is taxable in year title is reduced to undisputed possession. In Macomber terms, the cash was severable from the piano.

      • Windfall (taxed) vs. Appreciation (not taxed) depends on what the taxpayer previously owned. Third category is market bargains, which are not taxed (except in when they fall under §132 – fringe benefits).

        • If realization event never occurs, tax never happens. §1014. Comes up later.

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