In the 1932 case of Burnet, Commissioner of Internal Revenue v. S. & L. Building Corp., the United States Supreme Court addressed a dispute over federal income tax liability for a corporation that had been dissolved and liquidated its assets to pay off debts, but still held some remaining property which was distributed among shareholders as dividends in kind. The court ruled against S&L Building Corporation's argument that this distribution should not be taxed because it did not result in any cash profit for the company or its shareholders; instead, they considered such distributions as taxable income under existing law at that time (Revenue Act of 1921). This decision reinforced the principle that corporations must pay taxes on all forms of income - including non-cash benefits like property distributions - even if those earnings are used to settle outstanding liabilities or do not generate immediate financial gain.

In the dissenting opinion for Burnet, Commissioner of Internal Revenue v. S. & L. Building Corp., Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles of tax law. He contended that a corporation should be able to deduct losses from its income in the year they were realized, not when they were anticipated or expected as per the majority’s ruling. According to him, this approach would provide a more accurate reflection of a company's financial situation and prevent potential abuses by corporations seeking to manipulate their taxable income through creative accounting practices or timing strategies related to loss recognition.