In the case of Don E. Williams Co. v. Commissioner of Internal Revenue, 1976, the U.S Supreme Court ruled on a tax dispute involving an oil company and its shareholders' dividends. The court held that when a corporation pays out dividends to its shareholders from current earnings or profits, it is not allowed to reduce its taxable income by claiming those payments as deductions under Section 301(c)(2) of the Internal Revenue Code (IRC). This section allows corporations to treat distributions in excess of accumulated earnings and profits as returns on capital investment which are non-taxable for recipients but also non-deductible for payers. However, this does not apply if there are sufficient current earnings or profits at the time distribution occurs even if they were earned after dividend declaration date but before payment date.

In the dissenting opinion for Don E. Williams Co. v. Commissioner of Internal Revenue, Justice Blackmun disagreed with the majority's interpretation of Section 337(a) of the Internal Revenue Code and its application to this case. He argued that Congress intended for nonrecognition treatment under Section 337(a) to apply only when a corporation sells or exchanges all its assets within a twelve-month period following adoption of a plan of complete liquidation, not in cases where it distributes them as dividends to shareholders during such period without selling or exchanging them first. The justice believed that by allowing nonrecognition treatment in this situation, the Court was permitting tax avoidance strategies contrary to congressional intent and policy objectives behind enactment of Section 337(a). Furthermore, he contended that legislative history supported his view on how this provision should be interpreted and applied.