The U.S. Supreme Court case Commissioner of Internal Revenue v. National Alfalfa Dehydrating & Milling Co., 1973, revolved around the issue of tax deductions for business expenses under Section 162(a) of the Internal Revenue Code. The National Alfalfa Dehydrating and Milling Company had deducted from its gross income the costs associated with producing and distributing free samples to potential customers as a part of their marketing strategy. However, the Commissioner of Internal Revenue disallowed these deductions arguing that they were capital expenditures rather than ordinary or necessary business expenses as defined by Section 262. The Supreme Court ruled in favor of National Alfalfa stating that such promotional activities are common in businesses seeking to expand market share and should be considered an ordinary expense under section 162(a). The court further clarified that even if such expenditure results in future benefits, it does not necessarily make them capital expenditures unless those benefits are long-term assets or improvements which was not applicable here.

In the dissenting opinion for Commissioner of Internal Revenue v. National Alfalfa Dehydrating & Milling Co., Justice Douglas argued that the majority's decision was a departure from established tax law principles. He contended that the Court should have adhered to its previous rulings, which held that capital gains treatment is only available when there is an actual sale or exchange of property. In this case, he believed no such transaction had occurred as National Alfalfa merely changed its form of doing business and retained control over all assets involved in the restructuring process. Therefore, according to him, it did not meet requirements for capital gains treatment under Section 337(a) of Internal Revenue Code (IRC). Furthermore, he expressed concern about potential abuse by corporations seeking tax advantages through similar reorganizations without any real change in ownership or control.