In the 1940 case of Harrison, Collector of Internal Revenue v. Schaffner, the United States Supreme Court was tasked with determining whether or not a taxpayer could deduct from his gross income an amount paid to redeem real estate sold at a tax sale. The petitioner argued that such payments were deductible as losses incurred in business transactions under section 23(e)(1) and (2) of the Revenue Act of 1936. However, the court ruled against this interpretation. It held that these payments did not constitute losses but rather were capital expenditures made to protect or recover title to property; thus they are non-deductible for federal income tax purposes. This decision clarified how certain types of financial transactions related to real estate should be treated within federal taxation law.

In the dissenting opinion for Harrison, Collector of Internal Revenue v. Schaffner, Justice Frankfurter disagreed with the majority's interpretation of Section 22(b)(3) of the Revenue Act. He argued that this section should not be read as a blanket exemption from taxation for all amounts received through insurance policies due to death. Instead, he believed it should only apply when such funds are used directly by beneficiaries to alleviate financial burdens caused by the insured person's death. In his view, if these funds were invested and generated income or interest over time - as was true in this case - then they should be subject to tax just like any other form of income or investment return would be under normal circumstances.