In the case of Commissioner of Internal Revenue v. Glenshaw Glass Co., the U.S. Supreme Court ruled that all income, regardless of its source, is subject to taxation unless specifically exempted by law. The dispute arose when Glenshaw Glass Company and others received punitive damages in a lawsuit against another company for antitrust violations and did not report these as income on their tax returns. The IRS argued that these damages constituted taxable income under section 22(a) of the Internal Revenue Code which defines gross income as "all income from whatever source derived." On appeal, the Supreme Court agreed with the IRS's interpretation stating that Congress intended to tax all gains except those specifically excluded. This decision significantly broadened what is considered taxable 'income' under US federal law.

In the dissenting opinion for Commissioner of Internal Revenue v. Glenshaw Glass Co., Justice Harold Hitz Burton argued that the majority's interpretation of "gross income" was overly broad and inconsistent with previous court decisions and Congressional intent. He contended that punitive damages should not be considered as gross income because they are not derived from capital, labor, or both combined - which he believed to be a fundamental requirement for something to qualify as gross income under tax law. Furthermore, he pointed out that such an expansive definition could lead to unfair results by taxing individuals on money received through no effort or merit of their own but rather due to fortuitous events like lottery winnings or inheritances. Justice Burton also expressed concern about potential double taxation if punitive damages were treated as taxable income since they often serve as compensation for losses already deducted elsewhere in taxpayers' returns.