In the case of Commissioner of Internal Revenue v. Jacobson, the Supreme Court ruled on a dispute regarding tax law and its application to stock dividends. The respondent, Mr. Jacobson, had received extra shares as a dividend from his company in 1940 but did not include them in his gross income for that year's tax return because he believed they were not taxable under Section 115(f) of the Revenue Act of 1936. However, the Commissioner argued that these additional shares should be considered part of Jacobson’s gross income and thus subject to taxation according to Section 22(a). The Tax Court sided with Jacobson initially but upon review by higher courts including ultimately by the U.S Supreme court it was held that such dividends are indeed taxable under section 22(a), reversing previous rulings favoring Mr.Jacobson.

In the dissenting opinion for Commissioner of Internal Revenue v. Jacobson, Justice Jackson disagreed with the majority's interpretation of Section 22(b)(3) of the Revenue Act. He argued that this section should not be interpreted to exclude from gross income only those amounts which are returned to policyholders as dividends on their policies. Instead, he believed it should also include any amount left in surplus after all liabilities and reserves have been met - regardless if these funds were later distributed as dividends or retained by insurance companies for future use. According to him, such an interpretation would align more closely with Congress' intent when they enacted this law - namely, to exempt mutual insurance companies from taxation on amounts returned (or potentially returnable) to policyholders rather than allowing them a double exemption both before and after distribution.