In the case of Hecht et al., Trustees, v. Malley, Former Collector of Internal Revenue in 1923, the United States Supreme Court was tasked with determining whether a tax assessment by the Commissioner of Internal Revenue could be challenged before payment. The trustees for a dissolved corporation argued that they should not have to pay an additional income tax assessed against them because it was unlawful and erroneous. They sought an injunction to prevent collection until their claim had been decided upon judicially. However, according to existing law at that time (the Anti-Injunction Act), taxpayers were required to first pay disputed taxes and then sue for refund if they believed the assessment was incorrect or unjustified. The court ruled against Hecht et al., upholding lower courts' decisions denying their request for injunctive relief from paying this contested tax bill prior to litigation over its validity. This decision reinforced the principle that federal courts generally do not interfere with ongoing administrative proceedings unless there is clear proof of irreparable damage without immediate judicial review.

In the dissenting opinion for Hecht v. Malley, Justice Holmes disagreed with the majority's interpretation of Section 214(a)(10) of the Revenue Act of 1918. The majority held that a trust could not deduct losses from sales or exchanges made on its own account but only those made on behalf of beneficiaries. However, Holmes argued that this was an overly narrow reading and did not reflect Congress' intent when drafting tax laws. He believed that trusts should be treated as separate taxable entities capable of conducting business in their own right and thus eligible to claim deductions for losses incurred in such activities. This view would have allowed trustees to deduct losses resulting from sales or exchanges regardless if they were conducted on their own account or for beneficiaries.