[16] 247 U.S. 339, 344 (1918).—On the other hand, in Lynch v. Turrish, 247 U.S. 221 (1918), the single and final dividend distributed upon liquidation of the entire assets of a corporation, although equalling twice the par value of the capital stock, was declared to represent only the intrinsic value of the latter earned prior to the effective date of the amendment, and hence was not taxable as income to the shareholder in the year in which actually received. Similarly, in Southern P. Co. v. Lowe, 247 U.S. 330 (1918) dividends paid out of surplus accumulated before the effective date of the amendment by a railway company whose entire capital stock was owned by another railway company and whose physical assets were leased to and used by the latter was declared to be a nontaxable bookkeeping transaction between virtually identical corporations.
[17] 247 U.S. 347 (1918).
[18] 252 U.S. 189, 206-208 (1920).
[19] Eisner v. Macomber, 252 U.S. 189, 207, 211-212 (1920). This decision has been severely criticized, chiefly on the ground that gains accruing to capital over a period of years are not income and are not transformed into income by being dissevered from capital through sale or conversion. Critics have also experienced difficulty in understanding how a tax on income which has been severed from capital can continue to be labeled a "direct" tax on the capital from which the severance has thus been made. Finally, the contention has been made that in stressing the separate identities of a corporation and its stockholders, the Court overlooked the fact that when a surplus has been accumulated, the stockholders are thereby enriched, and that a stock dividend may therefore be appropriately viewed simply as a device whereby the corporation reinvests money earned in their behalf. See also Merchants' Loan & T. Co. v. Smietanka, 255 U.S. 509 (1921).
[20] Reconsideration was refused in Helvering v. Griffiths, 318 U.S. 371 (1943).
[21] United States v. Phellis, 257 U.S. 156 (1921); Rockefeller v. United States, 257 U.S. 176 (1921). See also Cullinan v. Walker, 262 U.S. 134 (1923).
In Marr v. United States, 268 U.S. 536, 540-541 (1925) it was held that the increased market value of stock issued by a new corporation in exchange for stock of an older corporation, the assets of which it was organized to absorb, was subject to taxation as income to the holder, notwithstanding that the income represented profits of the older corporation and that the capital remained invested in the same general enterprise. Weiss v. Stearn, 265 U.S. 242 (1924), in which the additional value in new securities was held not taxable, was likened to Eisner v. Macomber, and distinguished from the aforementioned cases on the ground of preservation of corporate identity. Although the "new corporation had * * * been organized to take over the assets and business of the old * * *, the corporate identity was deemed to have been substantially maintained because the new corporation was organized under the laws of the same State with presumably the same powers as the old. There was also no change in the character of the securities issued," with the result that "the proportional interest of the stockholder after the distribution of the new securities was deemed to be exactly the same."
[22] Miles v. Safe Deposit & Trust Co., 259 U.S. 247 (1922).
[23] Koshland v. Helvering, 298 U.S. 441 (1936)
[24] Helvering v. Gowran, 302 U.S. 238 (1937).