In the case of Burnet, Commissioner of Internal Revenue v. Commonwealth Improvement Co., 1932, the U.S Supreme Court ruled on a tax dispute involving capital losses and gains. The Commonwealth Improvement Company had sold property at a loss in 1918 but did not claim it as a deduction until they filed their taxes for 1920. The company argued that since they didn't discover the mistake until after filing their 1918 return, they should be allowed to amend their returns retroactively. However, the court disagreed with this argument stating that deductions must be taken in the year when they are applicable and cannot be carried over into subsequent years unless there is specific legislation allowing such action. Therefore, according to existing laws at that time (Revenue Act of 1921), taxpayers could only carry forward net losses from one year to offset income in future years; there was no provision for carrying back losses or amending previous returns retrospectively.

In the dissenting opinion for Burnet v. Commonwealth Improvement Co., Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles of statutory interpretation. He contended that tax laws should be interpreted liberally in favor of taxpayers, not strictly against them as the majority had done. Furthermore, he maintained that a taxpayer should have a reasonable amount of time to claim deductions or credits after discovering they were entitled to them - something which would not be possible under the three-year statute of limitations imposed by the majority ruling. In his view, this limitation period could unfairly penalize taxpayers who discovered their entitlement late due to no fault on their part but because of delays caused by administrative or judicial proceedings.