In the 1940 case of Helvering v. Gambrill, the United States Supreme Court addressed a dispute over income tax liability. The respondent, Mr. Gambrill, had received dividends from his company in 1932 and 1933 which were declared out of earnings or profits accumulated after February 28th, 1913 but not distributed until after December 31st,1921. He argued that these should be taxed as capital gains rather than ordinary income under Section115 (a) and (b) of Revenue Act of 1932 and Revenue Act of June22nd ,1936 respectively. The Commissioner for Internal Revenue disagreed with this interpretation arguing that they should be treated as taxable dividends under section115(a). The Board Tax Appeals sided with Mr.Gambrill while the Circuit Court reversed this decision siding with the commissioner. Upon reaching Supreme court,the justices unanimously agreed with lower courts' ruling stating that such distributions are to be considered as taxable dividends regardless when they were earned or paid.The court held that Congress intended to treat all corporate distributions out of earnings or profits as dividend income subject to normal tax rates unless specifically exempted by statute.This decision clarified how certain types of corporate distributions would be taxed moving forward.

In the dissenting opinion for Helvering v. Gambrill, Justice McReynolds disagreed with the majority's interpretation of Section 22(a) of the Revenue Act of 1928. He argued that it was not Congress' intent to tax gifts as income and pointed out that there is no clear language in the statute indicating such an intention. According to him, a gift does not constitute "gains or profits and income derived from any source whatever," which are taxable under Section 22(a). Furthermore, he contended that if Congress had intended to tax gifts as income, they would have explicitly stated so in legislation rather than leaving it up to judicial interpretation. Therefore, he believed that Mrs. Gambrill should not be taxed on her husband's voluntary transfer of property because it was a gift rather than taxable income.