In the 1933 case of City Bank Farmers Trust Co. v. Schnader, the U.S Supreme Court dealt with a dispute over inheritance tax laws in Pennsylvania. The plaintiff was an executor of a New York resident's estate that held securities from corporations incorporated and doing business in Pennsylvania. Upon death, these securities were transferred to beneficiaries residing outside of Pennsylvania which prompted the state to impose its inheritance tax on them. The plaintiff argued this imposition violated both Due Process Clause and Commerce Clause under Fourteenth Amendment as it constituted extraterritorial taxation by taxing property located out-of-state (New York). However, the court ruled against this argument stating that since corporations were created under laws of Pennsylvania and carried out their operations within its jurisdiction, they are considered domiciled there for taxation purposes regardless where their stocks/securities physically exist or who owns them. Therefore, imposing inheritance tax on transfer of such corporate stock did not violate constitutional rights even if decedent/beneficiaries resided elsewhere because domicile principle allows states to levy taxes on intangible properties like corporate shares owned by non-residents when those corporations are essentially home-based entities operating within their borders.

In the dissenting opinion for City Bank Farmers Trust Co. v. Schnader, it was argued that Pennsylvania's inheritance tax law should not apply to securities held by a New York trust company on behalf of a deceased Pennsylvania resident. The dissenting justices believed that the state of Pennsylvania did not have jurisdiction over these assets because they were physically located in New York at the time of death and therefore could not be taxed by another state under constitutional principles governing interstate commerce and due process rights. They also disagreed with the majority's interpretation of legal ownership, arguing that physical possession is an essential element which cannot be ignored simply because beneficial interest resides elsewhere or changes hands upon death. Furthermore, they contended that allowing states to impose taxes based on residency rather than location would lead to double taxation and create undue burdens on interstate business activities.