The Carbon Steel Company v. Lewellyn case in 1919 revolved around the issue of taxation and whether or not a corporation could deduct losses from its income tax that were incurred due to selling capital assets below their cost value. The Carbon Steel Company had sold some of its property for less than it was worth, resulting in a loss, and wanted to subtract this loss from its taxable income. However, the Collector of Internal Revenue for Pennsylvania's twenty-third district argued that such deductions were only permissible if they resulted from transactions made in the ordinary course of business operations. The U.S Supreme Court ruled against the Carbon Steel Company stating that since these sales did not occur as part of regular business activities but rather represented an extraordinary event (the sale of capital assets), they could not be deducted under existing tax laws at that time.

The dissenting opinion in the Carbon Steel Company v. Lewellyn case argued that the majority misinterpreted the law and its application to this particular situation. The dissenting justices believed that a tax on excess profits was not unconstitutional, as it did not violate any provisions of due process or equal protection under the law. They contended that Congress has broad powers to levy taxes for public purposes, including those aimed at preventing undue accumulation of wealth by corporations during wartime conditions. Furthermore, they disagreed with the majority's view about what constitutes "income" for taxation purposes; instead arguing that profit derived from business operations should be considered income regardless of whether it is distributed or retained within a corporation. Therefore, they would have upheld the validity of taxing such undistributed profits.