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.
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.