Eisner V. Macomber - Issue

Issue

Essentially, therefore, the question in Macomber was not whether the shareholder had gain in an economic sense, but whether in legal or accounting terms the stock dividend was to be regarded as a taxable event. ... Stripped of its Constitutional element, the issue in Eisner v. Macomber in the end comes down to a "battle of similarities." Is a stock dividend (as the majority held) "more like" a situation in which a corporation simply accumulates its earnings and makes no distribution at all? Or is it (as Brandeis thought) "more like" the receipt of a cash dividend which is followed by a reinvestment of the cash received in additional shares? —Marvin Chirelstein, Federal Income Taxation, A Law Student's Guide

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