In the case of Helvering, Commissioner of Internal Revenue v. Fitch (1939), the U.S Supreme Court ruled on a tax dispute involving stock dividends. The respondent, Fitch, had received stock dividends from a corporation in which he was a shareholder and claimed that these were not taxable as income under Section 115(f) of the Revenue Act 1932 because they were made out of capital surplus rather than earnings or profits. However, the court held that such dividends are indeed taxable as income regardless of their source within corporate reserves. This decision clarified an ambiguity in federal tax law regarding what constitutes 'income' for taxation purposes by affirming that it includes any economic gain derived by taxpayers unless specifically exempted by statute.

In the dissenting opinion for Helvering v. Fitch, Justice Black disagreed with the majority's interpretation of Section 22(a) of the Revenue Act. He argued that this section was not intended to tax gifts but only income derived from labor or capital investment. The majority held that a transfer of property could be considered taxable income if it resulted in economic gain to the recipient, even if it was given as a gift and not earned through work or investment. However, Justice Black contended that such an expansive reading would allow Congress to levy taxes on any form of wealth acquisition, which he believed went beyond its constitutional power under the Sixteenth Amendment. Instead, he maintained that "income" should be narrowly defined as periodic monetary returns coming from one’s own personal efforts or investments made by them.