In the case of Fulman et al., Trustees v. United States, 1977, the Supreme Court ruled on a tax dispute involving charitable trusts. The trustees had invested in variable annuity contracts and claimed that income from these investments should be exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code because they were used for educational purposes. However, the IRS argued that this exemption did not apply as it was only intended for organizations and not trusts or funds. The court sided with the IRS stating that while Congress intended to encourage gifts to charities by providing an exclusion for investment income used directly for charitable purposes, it did not intend to provide such broad-based relief as would result if every trust or fund which devoted its earnings to charity could claim this status irrespective of its form or nature.

In the dissenting opinion for Fulman et al., Trustees v. United States, the justice argued that the majority's interpretation of Section 642(c) of the Internal Revenue Code was incorrect and overly narrow. The dissenting view held that this section should be interpreted to allow a deduction for amounts permanently set aside by trusts for charitable purposes in any given year, not just those actually paid out during that year. This would include amounts added to principal with an intent to use them later for charity. The justice believed this broader interpretation better aligned with Congress' intention when it enacted Section 642(c), which was to encourage private contributions towards public charities by providing tax incentives. Therefore, limiting deductions only to funds immediately distributed seemed counterproductive and inconsistent with legislative intent.