In the 1932 case of Burnet, Commissioner of Internal Revenue v. Huff et al., the United States Supreme Court ruled on a matter concerning federal income tax law. The respondents, Mr. and Mrs. Huff, had claimed losses in their 1921 tax return due to worthless stock they owned in two corporations that were liquidated without any distribution to shareholders because all assets were used to pay debts. They did not claim these losses until their 1924 return as they believed it was only then that the worthlessness could be ascertained with certainty following final liquidation proceedings for both companies. The IRS denied this deduction arguing that according to Section 206(a) of the Revenue Act of 1921, such deductions should have been made within "the taxable year" when stocks became worthless which is considered by them as being in 1921 itself. However, upon reaching Supreme Court after lower courts sided with Huffs', it held (5-4 majority) that while generally taxpayers must deduct losses during 'the taxable year' incurred but considering practical difficulties involved here - determining exact time when stocks became 'worthless' - some leeway can be given if taxpayer acted reasonably and in good faith like Huffs'. Thus ruling favored Huffs allowing them loss deduction from their taxes.

In the dissenting opinion for Burnet, Commissioner of Internal Revenue v. Huff et al., Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles of tax law. He contended that a taxpayer should be allowed to deduct losses from their income in the year they are realized, regardless of when they were discovered or acknowledged by authorities. According to him, this principle is fundamental to an equitable taxation system and has been consistently upheld by courts in prior decisions. The majority's ruling contradicts this established precedent without providing sufficient justification for doing so. Furthermore, he criticized the court’s interpretation of Section 214(a)(5) as overly narrow and contrary to its intended purpose - allowing taxpayers relief from losses incurred during business operations.