In the case of Bowers, Executor, v. Lawyers Mortgage Co., 1931, the U.S Supreme Court was tasked with determining whether a mortgage company could claim deductions for losses on loans that were deemed worthless during the tax year in question. The Lawyers' Mortgage Company had made several loans secured by mortgages and bonds which later became worthless. They claimed these as losses on their income tax return but this was disputed by Mr. Bowers who served as an executor to another estate involved in the matter. The court ruled unanimously in favor of Lawyers' Mortgage Co., stating that under Section 234(a)(4) of Revenue Act of 1918 they were entitled to deduct from gross income any debts which become worthless within the taxable year. This decision clarified how financial institutions can handle loan defaults for taxation purposes and set a precedent for future cases involving similar circumstances.

In the dissenting opinion for Bowers v. Lawyers Mortgage Co., Justice Stone argued that the majority's decision to uphold a New York law allowing creditors to charge higher interest rates on loans secured by real estate was inconsistent with previous rulings of the Court and violated principles of equal protection under the Fourteenth Amendment. He contended that there was no rational basis for distinguishing between loans secured by real estate and other types of loans, as both could be equally risky or safe depending on individual circumstances. Furthermore, he believed that this arbitrary distinction unfairly burdened borrowers who used their homes as collateral, often those in lower income brackets who had few other options for securing credit. Thus, he concluded that this discriminatory treatment lacked any reasonable justification and should have been struck down as unconstitutional.