In the case of Michael H. Boulware v. United States, 2007, the U.S Supreme Court ruled in favor of Boulware who was charged with tax evasion and filing a false income tax return. The court held that a taxpayer accused of criminal tax evasion may claim funds diverted from a corporation as returns on equity rather than taxable dividends even if no declaration or record identifies them as such at the time they were distributed. This ruling overturned an earlier decision by the Ninth Circuit Court which had found him guilty based on evidence that he had taken money from his wholly owned corporation without declaring it as income or dividend distribution. Boulware argued that these funds were non-taxable returns of capital since his company's earnings and profits did not exceed its distributions during those years, thus should not be considered constructive dividends subject to taxation under federal law. The Supreme Court agreed with this argument stating that for purposes of determining whether there is taxable gain when corporate property is transferred to shareholders, one must look first to see whether there are any earnings and profits available for distribution.

In the dissenting opinion for the case of Michael H. Boulware v. United States, Justice Souter argued that tax evasion should not be proven by showing a lack of dividend distribution when there is no legal obligation to distribute dividends in the first place. He contended that it was incorrect to assume criminal intent based on this fact alone and emphasized that such an assumption could lead to wrongful convictions. Furthermore, he pointed out inconsistencies in how courts have interpreted and applied relevant laws regarding constructive dividends and their role in proving fraudulent intent for tax evasion cases. In his view, these issues highlighted a need for clearer guidelines from Congress or regulatory authorities about what constitutes evidence of fraud in such situations.