In the case of Commissioner of Internal Revenue v. Stern, Transferee (1957), the Supreme Court ruled on a tax dispute involving a corporation's liquidation and subsequent transfer of assets to its shareholders. The court held that when there is an agreement among all parties involved in a corporate dissolution, where it is understood that certain shareholders will assume and pay specific corporate debts as part of their distribution share, these payments are not deductible by those shareholders as "losses" under section 23(e)(2) or section 24(b)(1)(B) of the Internal Revenue Code. Instead, they should be treated as part of the cost basis for acquiring those assets from the corporation during liquidation. This decision clarified how such transactions should be taxed and provided guidance for future cases involving similar circumstances.

In the dissenting opinion for Commissioner of Internal Revenue v. Stern, Transferee, Justice Brennan disagreed with the majority's interpretation of Section 311(a) of the Internal Revenue Code. He argued that this section does not require a transferee to be personally liable under state law in order for federal tax liability to apply. Instead, he believed that if a transfer is found fraudulent under state law and results in insolvency, then federal tax liability should automatically follow regardless of personal liability. Furthermore, he contended that Congress intended Section 311(a) as an additional tool for collecting unpaid taxes rather than limiting its scope only to those who are personally liable under state laws. Thus according to him, even though Texas law did not hold Mrs.Stern personally liable as a transferee due her husband’s death before fraud was established; she could still be held responsible for his unpaid taxes federally because his transfers were deemed fraudulent which led him insolvent.