In the 1930 case of Burnet, Commissioner of Internal Revenue v. Houston, the U.S Supreme Court ruled on a matter concerning federal income tax law. The issue at hand was whether or not an individual could claim a loss deduction for stock that became worthless in a previous year but wasn't claimed until later years when it was discovered to be worthless. Houston had purchased stock in 1917 and by 1921 it had become completely valueless; however, he did not discover this fact until 1924 and so didn't claim his loss until then. The Commissioner of Internal Revenue argued that under Section 214(a)(5) of the Revenue Act of 1921, such losses must be deducted from gross income for the taxable year during which they were sustained - meaning Houston's claim should have been made in or before 1921. The court sided with Burnet (the commissioner), ruling that even though taxpayers may only learn about their losses after-the-fact due to circumstances beyond their control, deductions can only be taken within statutory limits set by Congress - i.e., during the same taxable year as when those losses occurred.

In the dissenting opinion for Burnet, Commissioner of Internal Revenue v. Houston, Justice Holmes disagreed with the majority's decision to allow a taxpayer to claim a loss deduction in a year other than when it was actually sustained. He argued that this interpretation contradicted the clear language and intent of Congress in drafting tax laws. According to him, allowing such flexibility would open up opportunities for manipulation and abuse by taxpayers who could strategically time their deductions for maximum benefit. Furthermore, he contended that if Congress had intended such flexibility they would have explicitly stated so within the law itself.