In the case of Commissioner of Internal Revenue v. Engle et ux., 1983, the Supreme Court ruled on a tax dispute involving oil and gas leases. The respondents had purchased these leases as part of an investment program that allowed them to deduct intangible drilling and development costs (IDC) from their taxable income. However, they were later audited by the IRS who disallowed these deductions claiming they were not "at risk" for the amount claimed under Section 465(c)(1) of the Internal Revenue Code because their liability was limited to recoupment out of production revenue only. The Tax Court sided with taxpayers but this decision was reversed by Sixth Circuit court stating IDCs are not borrowed amounts hence cannot be deducted. The Supreme Court affirmed this judgment in favor of IRS stating that IDCs financed through nonrecourse loans do not qualify for deduction since investors are not personally liable or at economic risk if venture fails; thus, such expenses should be capitalized rather than expensed immediately against other income.

In the dissenting opinion for Commissioner of Internal Revenue v. Engle et ux., Justice Blackmun argued that the majority's decision was inconsistent with previous rulings and misinterpreted tax law. He contended that the taxpayers in this case should not be allowed to deduct interest on loans used to purchase single-premium life insurance policies, as they did not use these funds "for investment" or "in connection with a trade or business," which are requirements under Section 163(a) of the Internal Revenue Code for such deductions. Furthermore, he criticized the majority's reliance on United States v. Midland-Ross Corp., arguing it was irrelevant because it dealt with different issues under a different section of tax code. Finally, he expressed concern about potential abuse by taxpayers who could exploit this ruling to create artificial deductions through similar financial arrangements.