In the case of Foster et al., Executors v. United States in 1937, the Supreme Court ruled on a tax dispute involving an estate's income from oil and gas leases. The executors of the estate argued that this income should be classified as capital gains, which would result in lower taxes than if it were considered ordinary income. However, the government contended that these revenues constituted part of gross income under section 22(a) of Revenue Act 1928 and thus should be taxed at higher rates applicable to ordinary incomes. The court sided with the government by a vote of six to two (Justice Cardozo did not participate). It held that payments derived from oil and gas leases are taxable as gross income rather than capital gain because they represent return on investment rather than sale or exchange of property. This decision was based on their interpretation that depletion allowance provided for such properties does not convert lease payments into sales proceeds but is merely a recognition by Congress about exhaustion nature inherent in such resources' exploitation.

In the dissenting opinion for Foster et al., Executors, v. United States, Justice Cardozo disagreed with the majority's interpretation of tax law and its application to life insurance policies. He argued that the death benefits from a life insurance policy should not be considered part of a decedent's gross estate if they were purchased by someone else on their own initiative and at their own expense. In his view, this was consistent with both common sense understanding and legislative intent behind relevant tax laws. Furthermore, he contended that such an interpretation would avoid unnecessary complexity in determining what counts as part of one’s gross estate for taxation purposes.