In the 1983 case Dickman et al. v. Commissioner of Internal Revenue, the U.S. Supreme Court ruled that interest-free loans could be considered taxable gifts under federal law. The case involved Clyde W. Dickman who had made substantial interest-free loans to his family members and did not report them as gifts on his tax returns, arguing they were not "transfers" because he expected repayment in full at some point in the future and therefore should not be subject to gift taxes according to Section 2501 of the Internal Revenue Code (IRC). However, both a Tax Court and an Appeals Court disagreed with him before it reached the Supreme Court which upheld these rulings by a vote of 8-1 stating that free use of loaned funds is indeed an economic benefit that can be taxed under IRC's broad definition of what constitutes a gift.

In the dissenting opinion for Dickman et al. v. Commissioner of Internal Revenue, Justice O'Connor argued that interest-free loans between family members should not be considered taxable gifts under federal law. She contended that such transactions are common and typically motivated by familial affection rather than an intention to transfer wealth or evade taxes. Furthermore, she pointed out inconsistencies in the majority's reasoning, noting that if a loan is indeed a gift because it allows the borrower to use someone else's money without paying interest, then any act of forbearance could potentially be taxed as well - an outcome she deemed absurd and contrary to Congress' intent when drafting tax laws. Lastly, Justice O'Connor criticized the majority for failing to provide clear guidance on how these types of loans should be valued for taxation purposes.