In the 1931 case of Burnet, Commissioner of Internal Revenue v. Coronado Oil & Gas Co., the U.S. Supreme Court ruled on a tax dispute between the government and an oil company. The issue at hand was whether or not Coronado Oil & Gas Company could claim deductions for depletion and depreciation on its income tax returns from 1917 to 1920 based on their oil leases' value in those years, even though they had acquired them before March 1, 1913 (the effective date of federal income tax). The court held that such deductions were impermissible because they would result in double deduction benefits - once when calculating net income for determining excess profits taxes and again when computing taxable net income. This decision upheld previous rulings by lower courts favoring the government's position against allowing these types of deductions.

In the dissenting opinion for Burnet v. Coronado Oil & Gas Co., Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles of tax law. He contended that allowing a taxpayer to deduct losses from gross income in one year, based on an overvaluation of property sold in a prior year, contradicted established legal precedent which stipulates that each tax year is a separate unit for calculation purposes. Furthermore, he pointed out that this ruling could potentially open up opportunities for taxpayers to manipulate their reported incomes by adjusting valuations retrospectively. In his view, such deductions should only be permitted when there has been an actual loss within the taxable period under consideration.