In the case of Commissioner of Internal Revenue v. LoBue, 1955, the U.S Supreme Court ruled in favor of the Commissioner. The issue at hand was whether or not a bonus paid to an employee by his employer should be considered as income and therefore taxable under federal law. Mr. LoBue received stock from his employer as part of a bonus plan but argued that it shouldn't be taxed because he didn't have full control over it due to restrictions placed on its sale by the company's agreement with him. However, according to Section 22(a) of the Internal Revenue Code which defines gross income broadly, any economic benefit obtained by an individual is subject to tax unless specifically exempted elsewhere in code or statute. The court held that despite these restrictions, Mr.Lobue had still gained significant financial benefits from receiving this stock and thus it constituted taxable income under federal law.

In the dissenting opinion for Commissioner of Internal Revenue v. Lobue, Justice Frankfurter disagreed with the majority's interpretation of Section 22(a) of the Internal Revenue Code. He argued that it was not intended to tax unrealized appreciation in value but only actual gains realized by taxpayers. According to him, when a taxpayer purchases stock using an option given as compensation for services rendered and sells it at a higher price later on, he should be taxed only on his net gain from selling the stock (i.e., sale price minus purchase cost), not on its appreciated value at time of acquisition through exercising the option. The majority’s decision to tax based on this appreciated value would result in taxing potential income rather than actual income which contradicts established principles governing federal taxation laws according to Justice Frankfurter.