Defining Income

Abstract

More than half a century ago in Commissioner v. Glenshaw Glass, the Supreme Court defined "income," as used in section 61 of the Internal Revenue Code, as "undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion." The Code narrows the scope of income by providing for specific exclusions but, outside of those exclusions, the Code's own, self-referential definition-"gross income means income from whatever source derived" - seems to confirm the broad scope of the definition.The breadth of the Glenshaw Glass definition appears to be nearly co-extensive with the Haig-Simons definition of income, which is widely accepted as providing the theoretical foundation for the income tax. Accordingly, many tax professionals interpret the language in section 61 and Glenshaw Glass solely in light of the economic principles reflected in the Haig-Simons definition. The analytical structure for determining what is  income appears clear and is generally treated as immutable. The analysis begins with the broad mandate of section 61 and Glenshaw Glass. As long as there is a realized accession in the economic sense within the taxpayer's dominion, Glenshaw Glass would seem to provide that there is income unless, pursuant to the very first words of section 61, there is an exclusion in the statute. From the time they are introduced to the tax law, students are taught this analytical structure, and by the time they become practitioners and then judges or scholars, it is second nature.