- 5 -
treated identically. Capital gains and losses are treated
differently from other income items in several respects,
generally more favorably than most other income items. The
section 1211(b) limitation does not cause the sections 1 and 55
taxes to fall outside the sweep of the Sixteenth Amendment.
We agree with respondent’s conclusion.
3. Analysis
Article I, section 8, of the U.S. Constitution gives to the
Congress the “Power To lay and collect Taxes”. Under sections 2
(cl. 3) and 9 (cl. 4) of article I, “direct” taxes must be
apportioned among the States in proportion to census populations.
The Sixteenth Amendment has the effect of overriding the direct-
tax-apportionment requirement with respect to “taxes on incomes,
from whatever source derived”.4 Section 61 provides as follows:
4 Thus, the Sixteenth Amendment is properly a limited
removal of a limited restriction on the Congress’s broad power to
tax income; the Sixteenth Amendment is not the source of the
power to tax income. See, e.g., Eisner v. Macomber, 252 U.S.
189, 205-206 (1920); Simmons v. United States, 308 F.2d 160, 166
n.21 (4th Cir. 1962); Penn Mutual Indemnity Co. v. Commissioner,
32 T.C. 653, 659-666 (1959), affd. 277 F.2d 16, 19-20 (3d Cir.
1960). As a result, even if a tax does not qualify as an income
tax, that merely leads to whether the tax in question is a
“direct” tax; if the tax in question is not a direct tax, then
the tax in question still does not have to be apportioned.
Petitioners contend they should be allowed to deduct the
entire amounts of their realized and recognized capital losses,
in accordance with their tax returns. For petitioners to
prevail, they might have to persuade us of all the following:
(1) The limitation of section 1211(b) causes the sections 1 and
55 taxes to not be income taxes under the Sixteenth Amendment;
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011