In the 1944 case of Fidelity-Philadelphia Trust Co. v. Rothensies, the U.S Supreme Court ruled on a dispute over estate taxes. The executors of an estate had paid federal and state inheritance taxes which they later claimed as deductions from gross income in their federal tax return for the year 1931, but these claims were denied by the Commissioner of Internal Revenue. The executors then sued to recover what they believed was an overpayment due to this denial. However, it was found that although there is no statute specifically stating that such payments are not deductible, under existing law at that time (Revenue Act of 1926), only those expenses allowable by state law could be deducted from gross income for federal tax purposes; Pennsylvania law did not allow deduction of these payments as administration expenses when computing net taxable estates or transfers subject to death duties.The Supreme Court upheld this interpretation and ruled against the plaintiffs.

In the dissenting opinion for Fidelity-Philadelphia Trust Co. et al., Executors, v. Rothensies, Collector of Internal Revenue, Justice Robert H. Jackson argued that the majority's decision was inconsistent with previous court rulings and legislative intent regarding tax law. He contended that the executors should not be held liable for taxes on a trust they did not control or benefit from personally. According to him, this interpretation would unfairly penalize innocent parties who were merely fulfilling their fiduciary duties as executors of an estate by paying out funds to beneficiaries before all potential tax liabilities had been settled with the IRS. Furthermore, he believed it could create a chilling effect where executors might delay distributions due to fear of personal liability for unpaid taxes which is contrary to public policy encouraging prompt settlement of estates.