In the 1940 case of Helvering, Commissioner of Internal Revenue v. Hammel et ux., the United States Supreme Court ruled on a matter concerning tax law and property depreciation. The respondents, Mr. and Mrs. Hammel, had purchased an apartment building in Detroit during the Great Depression for less than its original cost or fair market value at that time due to economic conditions causing a decrease in property values across the country. They claimed deductions based on this lower purchase price when filing their income taxes but were denied by the Commissioner of Internal Revenue who argued that they should be calculated based on pre-depression values instead. The Supreme Court sided with Mr. and Mrs.Hammel stating that under Section 23(l) of the Revenue Act (1932), taxpayers are allowed to claim annual deductions for depreciation from wear and tear over time which is determined by considering both salvage value as well as adjusted basis (cost). In this context, it was decided that 'cost' refers to what was actually paid rather than any other potential valuation method such as replacement cost or fair market value prior to depression era decreases.

In the dissenting opinion for Helvering v. Hammel, Justice Black disagreed with the majority's interpretation of Section 113(a)(5) of the Revenue Act of 1932. He argued that this section was intended to provide relief from double taxation on property appreciation during a period when it was not possible to sell due to economic conditions or other reasons beyond control. The majority interpreted this provision as applying only if there had been an actual sale and subsequent repurchase, but Justice Black contended that such a narrow interpretation did not align with Congress' intent in enacting this legislation. He believed that taxpayers should be able to adjust their basis for depreciation purposes even without selling and repurchasing assets, provided they could demonstrate substantial changes in market value due to uncontrollable circumstances.