undertook to demonstrate
how what was not income, but an increment of capital when received,
could later be transmitted into income upon sale or conversion, and
could be taxed as such without the necessity of apportionment. In short,
the term "income" reacquired to some indefinite extent a restrictive
significance.

Specifically, the Justice held that a stock dividend was capital when
received by a stockholder of the issuing corporation and did not become
taxable without apportionment; that is, as "income," until sold or
converted, and then only to the extent that a gain was realized upon the
proportion of the original investment which such stock represented. "A
stock dividend," Justice Pitney maintained, "far from being a
realization of profits to the stockholder, * * * tends rather to
postpone such realization, in that the fund represented by the new stock
has been transferred from surplus to capital, and no longer is available
for actual distribution. * * * not only does a stock dividend really
take nothing from * * * the corporation and add nothing to that of the
shareholder, but * * * the antecedent accumulation of profits evidenced
thereby, while indicating that the shareholder is richer because of an
increase of his capital, at the same time shows [that] he has not
realized or received any income in" what is no more than a "bookkeeping
transaction." But conceding that a stock dividend represented a gain,
the Justice concluded that the only gain taxable as "income" under the
amendment was "a gain, a profit, something of exchangeable value
_proceeding from_ the property, _severed from_ the capital however
invested or employed, and _coming in_, being '_derived_,' that is,
_received_ or _drawn by_ the recipient [the taxpayer] for his _separate_
use, benefit, and disposal; * * *." Only the latter, in his opinion,
answered the description of income "derived" from property; whereas "a
gain accruing to capital, not a _growth_ or an _increment_ of value _in_
the investment" did not.[19]

Although steadfastly refusing to depart from the principle[20] which it
asserted in Eisner _v._ Macomber, the Court in subsequent decisions has,
however, slightly narrowed the application thereof. Thus, the
distribution, as a dividend, to stockholders of an existing corporation
of the stock of a new corporation to which the former corporation, under
a reorganization, had transferred all its assets, including a surplus of
accumulated pro