In the Biddle v. Commissioner of Internal Revenue case in 1937, the U.S Supreme Court ruled on a tax dispute involving an estate's claim to deduct foreign death taxes from its federal gross estate for purposes of calculating U.S. estate tax liability. The court held that under Section 303(a)(3) of the Revenue Act of 1926, only those foreign death taxes could be deducted which were levied upon property situated within such country and forming part of the decedent’s gross estate as defined by American law. This meant that if a portion or all assets are not considered part of the decedent's gross estate according to US laws but are taxed by another country after their demise, these cannot be deducted when determining US Estate Tax Liability.

In the dissenting opinion for Biddle v. Commissioner of Internal Revenue, Justice Cardozo disagreed with the majority's interpretation of Section 42(d) and (e) of the Revenue Act of 1928. He argued that these sections should not be read as allowing a taxpayer to deduct losses from sales between family members or other related entities in which there is no real change in beneficial ownership. According to him, such transactions are essentially collusive and do not result in any actual economic loss for tax purposes. He believed that Congress intended this provision to apply only where there was an arm’s length transaction resulting in an actual economic loss, rather than simply a paper loss created by transferring assets within a controlled group. Therefore, he would have upheld the decision by the Board of Tax Appeals denying Mr.Biddle's claimed deduction.