A Question Important to Investors (Whether They Realize It or Not): Is Realization a Constitutional Requirement for Income Taxation?


Erik M. Jensen


This article considers whether realization continues to be a constitutional requirement for an accession to wealth to be included in the base of the federal income tax. Most commentators had thought that the Supreme Court’s 1920 decision in Eisner v. Macomber, which treated realization as central to the meaning of “taxes on incomes” in the Sixteenth Amendment, was deadwood, or close to it. In 2012, however, in his controlling opinion in National Federation of Independent Business v. Sebelius, Chief Justice Roberts cited Macomber favorably on a point critical to the resolution of that case. If realization still has constitutional legs, a number of provisions in the Internal Revenue Code, including those that rely on mark-to-market concepts, are constitutionally suspect.


Realization Requirement, Sixteenth Amendment, Eisner v. Macomber, Pollock

Publication Date


Document Type


Place of Original Publication

Journal of Taxation of Investments

Publication Information

31 (1) Journal of Taxation of Investments 19 (2013)

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COinS Erik M. Jensen Faculty Bio