In the case of Helvering, Commissioner of Internal Revenue v. Stockholms Enskilda Bank in 1934, the U.S. Supreme Court ruled on a matter concerning taxation and international law. The Swedish bank had purchased bonds issued by an American corporation and later sold them at a loss. The issue was whether this loss could be deducted from its gross income for tax purposes under Section 23(e)(2) of the Revenue Act of 1928 which allowed deductions for losses incurred in transactions entered into for profit though not connected with trade or business within America. The IRS argued that since foreign corporations were only taxed on their income from sources within the United States, they should not be permitted to deduct losses arising from sales outside America. The court held that although generally foreign corporations are taxed only on domestic source income, when it comes to capital gains and losses there is no geographical limitation imposed by Congress in defining what constitutes taxable net income; hence such limitations cannot be inferred merely because other sections impose them regarding different types of incomes or taxpayers. Therefore, even if these securities transactions occurred abroad between non-resident entities (the Swedish bank selling to another European entity), as long as they were made "for profit", any resulting loss can still affect US-taxable net-income calculations.

In the dissenting opinion for Helvering v. Stockholms Enskilda Bank, Justice Stone disagreed with the majority's interpretation of Section 213(b) of the Revenue Act of 1921. He argued that this section should not be interpreted to exclude from gross income any interest on obligations of a state or its political subdivisions held by non-resident aliens and foreign corporations, unless they are engaged in business within the United States and such interest is received from sources within the U.S. According to him, Congress intended to tax all income derived from American sources regardless if it was earned by foreigners who were not conducting business in America. Therefore, he believed that exempting these entities would contradict congressional intent and create an unjustifiable distinction between resident aliens/foreign corporations doing business in America versus those who weren't but still profiting off American investments.