In the case of F. H. E. Oil Co v Helvering, Commissioner of Internal Revenue (1939), the U.S Supreme Court ruled on a dispute regarding tax deductions for oil companies. The F.H.E Oil Company had claimed substantial deductions based on depletion and depreciation in relation to their oil wells, arguing that these were allowable under existing tax laws as they represented a decrease in value of their capital assets over time due to extraction activities. The Commissioner of Internal Revenue disagreed with this interpretation and disallowed some of these deductions, leading to an increase in the company's assessed taxes which it contested legally. The Supreme Court sided with the Commissioner, ruling that while such deductions could be valid under certain circumstances, they must be reasonable and not excessive or disproportionate relative to actual decreases in asset values resulting from production activities. This decision clarified how depletion allowances should be calculated for taxation purposes within the oil industry.

In the dissenting opinion for F. H. E. Oil Co v Helvering, Commissioner of Internal Revenue, 1939, Justice Black disagreed with the majority's interpretation of Section 113(a)(8) and (b)(1)(B) of the Revenue Act of 1934 as it pertained to oil payment rights. He argued that these sections did not permit a depletion allowance on such payments because they were essentially an advance sale or exchange rather than income from production which could be depleted over time. The justice believed that this misinterpretation would allow taxpayers to evade taxes by selling their future income in advance and then claiming a depletion deduction on it even though no actual extraction had occurred during the tax year in question.