The U.S. Supreme Court case Commissioner of Internal Revenue v. Gooch Milling & Elevator Co., 1943, revolved around the issue of tax deductions for a corporation's payment to its shareholders in exchange for their surrendering certain rights that they held as stockholders. The company had issued preferred and common stocks, with the former having priority over dividends but no voting rights. To eliminate this dual class structure, the company paid an amount to preferred stockholders who surrendered their shares and received common ones instead. The IRS argued that these payments were essentially dividends and thus not deductible business expenses under federal income tax law. However, the court ruled in favor of Gooch Milling & Elevator Company by stating that such payments were indeed ordinary and necessary business expenses made to simplify corporate structure which is beneficial for future operations; hence they should be allowed as deductions from gross income under Section 23(a) (1)(A) of the Revenue Act of 1936.

In the dissenting opinion for the case Commissioner of Internal Revenue v. Gooch Milling & Elevator Co., Justice Frank Murphy argued that the majority's interpretation of Section 22(b)(5) was too restrictive and not in line with Congressional intent. He contended that Congress intended to provide a broad exemption from income tax for amounts received through insurance as compensation for loss or damage due to fire, storm, shipwreck, or other casualty. The majority's decision to limit this exemption only to situations where property is completely destroyed undermines this purpose and imposes an undue burden on taxpayers who suffer partial losses. Furthermore, he disagreed with their assertion that depreciation deductions should be considered when calculating such exemptions because they are unrelated concepts under tax law; one pertains to gradual wear and tear over time while the other relates specifically to sudden unexpected damages caused by external events.