In the 1939 case Deputy, Administratrix, et al. v. Du Pont, the U.S Supreme Court was tasked with determining whether or not a taxpayer could deduct from his gross income gifts of securities to members of his family for federal tax purposes. The petitioner argued that these were non-taxable gifts while the respondent claimed they should be considered part of taxable income as they were essentially dividends on stock owned by Mr. du Pont and therefore subject to taxation under Section 115(f) of the Revenue Act. The court ruled in favor of du Pont stating that these transfers did indeed constitute bona fide gifts and thus fell outside taxable income according to existing law at that time (Revenue Act). This decision hinged on an interpretation which held "gifts" as separate from "dividends", even if those dividends are given away immediately after receipt; it is still considered a gift rather than dividend income. This ruling had significant implications for tax law moving forward because it clarified how certain types of financial transactions would be treated under federal tax legislation.

In the dissenting opinion for Deputy, Administratrix, et al. v. Du Pont (1939), Justice Black argued that the majority's interpretation of "income" in Section 22(a) of the Revenue Act was too broad and inconsistent with previous rulings by both Congress and the Supreme Court. He contended that dividends paid out from a corporation's earnings or profits should be considered income, but not those derived from capital investment or stock splits which he viewed as mere changes in form rather than actual gain to shareholders. Furthermore, he criticized the majority for relying on Eisner v Macomber (1920) case precedent without considering its controversial nature and limited application only to federal taxation under Sixteenth Amendment constraints. In his view, this led them to mistakenly equate corporate distributions made out of capital surplus with taxable income when they were actually non-taxable returns on capital investments.