In the 1932 case of Gwinn v. Commissioner of Internal Revenue, the U.S Supreme Court was tasked with determining whether a taxpayer could deduct losses from stock sales in companies where they were an officer or employee. The petitioner, Mr. Gwinn, had sold stocks at a loss and claimed these as deductions on his tax return under Section 214(a)(5) of the Revenue Act of 1921 which allowed for deduction of losses incurred in transactions entered into for profit though not connected with trade or business. The IRS disallowed these claims arguing that since Mr. Gwinn was an officer and director in some companies whose stocks he sold at a loss, those transactions were essentially salary reductions rather than capital losses. However, the Supreme Court ruled against this interpretation stating that being an officer or employee does not necessarily mean one cannot engage in independent transactions with such corporations for personal profit motive separate from their employment relationship. Therefore it held that Mr.Gwinn's stock sale losses should be deductible because they were made primarily to protect his investments and not merely as part of his duties as an officer/director/employee.

In the dissenting opinion for Gwinn v. Commissioner of Internal Revenue, it was argued that the majority's interpretation of "income" under Section 22(a) of the Revenue Act was too narrow and inconsistent with previous court decisions. The dissenting justices believed that income should be defined more broadly to include all accessions to wealth, clearly realized and over which taxpayers have complete dominion. They disagreed with the majority's view that Mrs. Gwinn did not realize any income from her husband’s life insurance policy until she received payments because they thought this ignored economic reality. In their view, Mrs.Gwinn had a valuable property right in her husband’s life insurance policy as soon as he died - a right she could sell or borrow against - and therefore had realized income at his death rather than when she later received payments from it.