In the 1941 case of Helvering, Commissioner of Internal Revenue v. Alabama Asphaltic Limestone Co., the Supreme Court ruled on a tax dispute between the federal government and an Alabama-based company. The issue at hand was whether or not depletion deductions could be claimed by a taxpayer who had leased land for mining purposes but had not yet begun to extract minerals from it. The court held that such deductions were permissible under Section 114(b)(4) of the Revenue Act, which allowed for "a reasonable allowance for depletion" based on gross income derived from property used in mining operations. This ruling clarified that potential future profits could be considered when calculating this deduction, even if no actual extraction has taken place during the taxable year.

In the dissenting opinion for Helvering v. Alabama Asphaltic Limestone Co., Justice Black argued that the majority's decision was inconsistent with previous rulings and allowed corporations to avoid paying taxes on income derived from property sales by simply re-characterizing these transactions as capital contributions. He contended that this interpretation of tax law undermined its purpose, which is to impose a levy on net income, not just certain types of it. Furthermore, he expressed concern about potential abuse if companies could manipulate their financial statements in such a way to evade taxation. In his view, allowing businesses to classify profits from property sales as non-taxable capital contributions would create an unfair loophole in the tax system and contradict established legal principles regarding corporate taxation.