The Gulf Oil Corporation v. Lewellyn case in 1918 revolved around the issue of whether or not a corporation could deduct from its gross income, for federal tax purposes, amounts paid to another company as royalties for the use of patents. The Gulf Oil Corporation had entered into an agreement with another company that held several valuable patents and was paying them substantial sums as royalties. When calculating their taxes, they deducted these payments from their gross income but were denied by the Collector of Internal Revenue who argued that such deductions were not permissible under existing law. The Supreme Court ruled in favor of Gulf Oil Corporation stating that royalty payments made for patent rights are considered ordinary and necessary business expenses and therefore deductible under U.S tax laws.

In the dissenting opinion for Gulf Oil Corporation v. Lewellyn, it was argued that the majority's interpretation of the law was incorrect and overly broad. The dissenting justices believed that Congress did not intend to tax corporations on income derived from property used in business operations when they enacted the Revenue Act of 1916. They contended that such an interpretation would lead to double taxation, as corporations would be taxed both on their income and again on any increase in value of their property used in generating this income. Furthermore, they pointed out inconsistencies between this decision and previous court rulings regarding similar issues. In conclusion, these justices felt that a more narrow reading of the statute was appropriate - one which only subjected profits realized through actual sales or dispositions to taxation.