In the case of Commissioner of Internal Revenue v. Cooper et al., 1964, the U.S. Supreme Court ruled on a tax dispute involving capital gains from liquidating dividends received by shareholders in two corporations undergoing reorganization under Section 112(b)(6) and (7) of the Revenue Act of 1939. The court held that these were not taxable as capital gains but should be treated as ordinary income because they did not result from a sale or exchange transaction, which is required for taxation as capital gain under Section 117(a). The decision was based on an interpretation that Congress intended to treat such distributions differently than those resulting from sales or exchanges when it enacted provisions allowing non-recognition treatment for certain corporate reorganizations.

In the dissenting opinion for Commissioner of Internal Revenue v. Cooper et al., Justice Harlan disagreed with the majority's interpretation of Section 117(a)(1) and (2) of the Internal Revenue Code, which pertains to capital gains tax on liquidation distributions. He argued that this section should not be interpreted as excluding all non-liquidating corporate distributions from being considered a return on capital investment. Instead, he believed it was meant to exclude only those dividends paid out of earnings or profits from such consideration. He further contended that treating these types of distributions differently would create an unjustifiable disparity in taxation between shareholders who receive their returns through liquidations and those who do so through regular dividends. This, according to him, contradicts Congress' intent when creating these provisions - ensuring equitable treatment among taxpayers receiving similar income under different forms.