In the 1935 case of Helvering v. Combs, the U.S Supreme Court was tasked with deciding whether income from a trust could be taxed as personal income to the beneficiary or if it should be considered separate and thus not taxable. The court ruled in favor of Helvering, Commissioner of Internal Revenue, stating that under Section 22(a) of the Revenue Act (1928), gross income includes gains or profits and income derived from any source whatever. Therefore, even though a trustee has legal title to property held in trust for another person's benefit (the beneficiary), when such property produces an economic gain for that other person - here being dividends on stock owned by trusts - this is still "income" within ordinary meaning and hence subject to tax under federal law.

In the dissenting opinion for Helvering v. Combs, Justice Stone argued that the majority's decision to tax trust income as personal income of the grantor was a misinterpretation of federal law. He contended that Congress intended to tax only those who have control over and benefit from property, not those who merely establish trusts without retaining any power or interest in it. According to him, this interpretation would lead to unjust taxation on individuals who had no control over or benefits from certain properties. Furthermore, he believed that such an interpretation could potentially discourage people from establishing trusts for fear of being taxed unfairly - which is contrary to public policy encouraging charitable giving and estate planning through trusts.