The U.S. Supreme Court case General Utilities & Operating Co. v. Helvering, Commissioner of Internal Revenue in 1935 revolved around the taxation of a corporation's capital gain from property distribution to its shareholders. The court ruled that under the Revenue Act of 1928, a corporation was not liable for income tax on gains realized from selling or distributing assets to its stockholders if it had received those assets as contributions to capital and had never used them in business operations. This ruling established what came to be known as the "General Utilities doctrine," which allowed corporations to avoid double taxation on appreciated property by distributing it directly to their shareholders without recognizing any taxable gain at the corporate level.

In the dissenting opinion for General Utilities & Operating Co. v. Helvering, Justice Stone argued that the majority's interpretation of Section 112(b) and (i) of the Revenue Act was incorrect. He believed that these sections did not exempt corporations from paying tax on gains realized through liquidation distributions to shareholders, as interpreted by the majority. Instead, he contended that they were designed to prevent double taxation of corporate earnings - once when earned by a corporation and again when distributed to its shareholders in liquidation or otherwise - but only if those earnings had been previously taxed at both levels under existing law. According to him, this case involved no such double taxation because there was no prior shareholder-level tax on undistributed corporate profits before their distribution in liquidation; hence there should be no exemption from corporate-level tax either.