The Frank Lyon Co. v. United States case in 1977 revolved around the issue of tax benefits from a sale and leaseback arrangement. The Worthen Bank needed a new building but due to regulatory restrictions, it could not finance the construction itself. Hence, it entered into an agreement with Frank Lyon Company where the latter would buy land, construct the building according to Worthen's specifications and then lease it back to them for long-term use while retaining ownership rights. However, when Frank Lyon tried claiming depreciation deductions on its income tax returns based on this property investment, IRS denied these claims arguing that only Worthen was entitled as they were bearing all risks and rewards associated with property ownership despite not holding legal title. Upon reaching Supreme Court after lower court rulings favoring IRS, justices ruled in favor of Frank Lyon by 6-3 majority stating that even though economic realities are important in determining true owner for taxation purposes; here both parties had significant business reasons other than taxes for entering into their agreement which cannot be ignored just because one party (Worthen) bore more financial risk than another (Frank). Therefore if taxpayer has genuine multiple motives including non-tax ones behind transactions like these then they should be respected under law.

In the dissenting opinion for Frank Lyon Co. v. United States, Justice Blackmun argued that the majority's decision was inconsistent with previous tax law principles and would encourage taxpayers to structure transactions in ways that artificially generate deductions. He believed that the transaction between Worthen Bank and Frank Lyon Company was essentially a financing arrangement rather than a sale-leaseback agreement, as it lacked economic substance beyond creating tax benefits for Frank Lyon Company. In his view, allowing such arrangements to be treated as sales would undermine the integrity of federal income taxation by enabling businesses to manipulate their taxable incomes through contrived transactions designed solely for tax purposes.