In the case of Helvering v. Canfield, 1933, the U.S Supreme Court ruled on a tax dispute involving stock dividends. The respondent, Canfield, had received additional shares as a dividend from his company and argued that these should not be considered taxable income under the Revenue Act of 1921 because they did not increase his wealth but merely represented a different form of it. However, Commissioner of Internal Revenue Guy T. Helvering contended that such dividends were indeed subject to taxation according to law. The court sided with Helvering in this matter by interpreting Section 201(g) and (h) of the Revenue Act which stated that stock dividends shall be treated as taxable income unless they are issued proportionally without increasing any shareholder's proportional interest in the corporation's assets or earnings potential. Therefore, even though Canfield’s overall stake in his company remained unchanged after receiving extra shares through dividend distribution; he was still liable for paying taxes on them since those additional stocks increased his claim over corporate assets and future profits.

In the dissenting opinion for Helvering v. Canfield, Justice Cardozo disagreed with the majority's view that a taxpayer could not deduct losses from sales of stock to family members because such transactions were not "bona fide" and lacked economic substance. He argued that there was no legal basis for this interpretation and it contradicted established tax law principles. According to him, if Congress intended to exclude such transactions from being considered as genuine sales or exchanges, they would have explicitly stated so in the statute. Furthermore, he pointed out that under common law rules governing contracts and property transfers, these types of intra-family transactions are generally recognized as valid unless proven fraudulent or collusive. Therefore, he believed that taxpayers should be allowed to claim deductions for losses incurred in bona fide sales of stocks even when sold within families.