The Equitable Life Assurance Society v. Commissioner of Internal Revenue case in 1943 revolved around the issue of tax deductions for losses incurred by an insurance company. The Equitable Life Assurance Society had purchased bonds during World War I, which later defaulted and were sold at a loss. The company claimed these losses as a deduction on their income taxes, arguing that they fell under the category of "losses incurred in the operation of its business." However, the Commissioner of Internal Revenue denied this claim stating that such losses could only be deducted if they were directly connected to underwriting or investment operations. The Supreme Court ruled against Equitable Life Assurance Society's argument and upheld the decision made by lower courts supporting IRS’s stand. It held that while purchasing bonds was part of normal business operations for an insurance company, any resulting loss from those purchases did not fall within statutory language allowing deductions for "losses incurred ... in carrying on any trade or business," because it wasn't directly tied to either underwriting or investing activities.

In the dissenting opinion for Equitable Life Assurance Society v. Commissioner of Internal Revenue, it was argued that the majority's interpretation of Section 204(c) and (g) of the Revenue Act of 1921 was incorrect. The dissenting justices believed that these sections should not be read to mean that a life insurance company could deduct from its gross income all amounts reserved as policyholder dividends until they were actually paid out. They contended this interpretation allowed companies to manipulate their taxable income by simply increasing or decreasing reserves arbitrarily. Instead, they suggested an alternative reading where only those amounts which are "required by law" or "by the charter or other contract with policyholders" to be set aside can be deducted from gross income before taxation. This would prevent manipulation while still allowing legitimate deductions for necessary reserves.