Tax Legal Services · Primary-source case analysis

Eisner v. Macomber: A Pro Rata Stock Dividend Was Not Realized Income

By Aneeta Mishra and Timothy Chan

Published August 30, 2026

Eisner v. Macomber addressed a dividend of additional common shares issued proportionately to existing common shareholders from accumulated corporate earnings.

The shareholder’s proportionate interest did not change

The new certificates divided the same corporate interest into more shares; no corporate assets were distributed and no owner gained relative to another.

The Court required a gain severed from capital

For the distribution at issue, the majority treated income as a gain derived from capital and made available to the taxpayer for separate use.

The statutory tax exceeded the Sixteenth Amendment as applied

The Court held that Congress could not tax this particular pro rata stock dividend as income without apportionment.

The holding must be used narrowly

Later cases and statutes distinguish cash, property, option, and disproportionate distributions, and modern realization doctrine cannot be reduced to Macomber’s broadest language.

Key takeaways

• Identify exactly what property or rights the distribution changed.
• Test whether value was severed or ownership proportions shifted.
• Apply current Internal Revenue Code stock-dividend rules.
• Do not treat unrealized appreciation and every stock distribution as the same event.