In the 1936 case of Brush v. Commissioner of Internal Revenue, the U.S Supreme Court ruled on a dispute involving income tax and stock dividends. The petitioner, Charles F. Brush, had received additional shares as a stock dividend from his company in 1918 which he later sold in 1920 for profit. He argued that this should not be considered taxable income since it was derived from post-1913 earnings and profits of the corporation (as per Section 201(g) of the Revenue Act). However, the court disagreed with him stating that under Section II(G)(a)2(a), such dividends are to be included in gross income regardless if they were paid out of earnings or profits accumulated before March 1st, 1913 or after February last day thereof. The court held that when a shareholder sells their dividend stocks at an appreciated value than what they initially acquired them for; then any gain realized is subject to taxation as ordinary income rather than capital gains because these shares represent corporate earnings/profits distributed to shareholders irrespective whether those earning/profits were made pre/post-March1st ,1913 . Therefore Mr.Brush's argument was rejected by Supreme Court affirming lower courts' decisions making him liable for paying taxes on his sale proceeds.

In the dissenting opinion for Brush v. Commissioner of Internal Revenue, Justice Cardozo disagreed with the majority's ruling that a taxpayer could not deduct losses from their income tax return if they had previously claimed them as deductions on their estate tax return. He argued that there was no legal basis to prevent taxpayers from claiming these losses twice and emphasized that it was Congress' responsibility to close such loopholes in the law, not the courts'. Furthermore, he pointed out inconsistencies in how different types of taxes were treated under this rule. For instance, while estate taxes were considered final and irrevocable once paid, income taxes could be adjusted retroactively based on new information or changes in circumstances. This discrepancy made it unfair to deny taxpayers the right to claim legitimate losses just because they had already been accounted for elsewhere.