In the 1934 case of Helvering v. Inter-Mountain Life Insurance Co., the U.S. Supreme Court ruled in favor of the Commissioner of Internal Revenue, Guy T. Helvering, determining that a life insurance company's income from its bond investments was taxable under federal law. The Inter-Mountain Life Insurance Company had argued that this income should be exempt from taxation as it was derived from tax-exempt securities and thus constituted return on capital rather than profit or gain. However, the court rejected this argument based on an interpretation of Section 203(a)(2) and (3) of the Revenue Act which stated that only interest received or credited upon such obligations is excluded from gross income for purposes of taxation; not gains realized through their sale or redemption before maturity.

In the dissenting opinion for Helvering v. Inter-Mountain Life Insurance Co., Justice Stone argued that the majority's interpretation of the tax code was incorrect and overly broad. He contended that a literal reading of Section 204(a)(2) would lead to absurd results, as it would allow any company with surplus or undivided profits to be classified as an investment company, regardless of its primary business activities. Instead, he suggested that Congress intended this provision to apply only to companies whose main purpose is investing in securities. Furthermore, he disagreed with the majority's view on what constitutes 'investments', arguing that policy loans should not be considered investments because they are fundamentally different from typical security investments and do not carry similar risks or rewards. Lastly, Justice Stone criticized the majority for ignoring legislative history which could provide valuable context for interpreting ambiguous statutory language.