The Ironic Australian Legacy of Eisner v. Macomber

Australian Tax Forum, Vol. 7, No. 2, pp. 191-206, 1990

14 Pages Posted: 27 Aug 2010

See all articles by Richard Krever

Richard Krever

University of Western Australia Law School

Date Written: April 1, 1990

Abstract

No metaphor is dearer to the hearts of Australian tax scholars and practitioners than the fruit and tree depiction of income and capital. An important characterisation in early economic theory, the agricultural allegory was imported into Australian income tax law not long after the adoption of the first federal legislation from the 1920 decision of the U.S. Supreme Court in Eisner v. Macomber. Australian tax lawyers cite Eisner v. Macomber and its fruit and tree analogy as judicial endorsement of the distinction between income and capital and the immunity from income taxation of gains associated with the latter. However, the case states quite explicitly that both income and capital gains constitute 'income' for 'income tax' purposes. To find support in the judgment for a contrary proposition is possible only if the Supreme Court's ruling is carefully dissected and the extracted parts quoted out of context. This article explains how Australian tax lawyers, judges and scholars have used the case as support for a conclusion opposite to that set out in the judgment. The peculiar Australian legacy of Eisner v. Macomber serves as a useful reminder of the narrow and parochial origins of Australian tax jurisprudence and the slowness of its evolution.

Suggested Citation

Krever, Richard, The Ironic Australian Legacy of Eisner v. Macomber (April 1, 1990). Australian Tax Forum, Vol. 7, No. 2, pp. 191-206, 1990, Available at SSRN: https://ssrn.com/abstract=1666189

Richard Krever (Contact Author)

University of Western Australia Law School ( email )

M253
35 Stirling Highway
Crawley, Western Australia 6009
Australia

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