In the case of Helvering v. National Grocery Co., 1937, the U.S Supreme Court was tasked with determining whether a corporation could deduct from its gross income an amount paid to redeem its own stock as "ordinary and necessary" business expenses under Section 23(a) of the Revenue Act of 1928. The National Grocery Company had bought back some of its shares at a price higher than their par value in order to prevent hostile takeover attempts. The company then claimed this payment as a deductible business expense on their federal tax return, which was initially denied by the Commissioner of Internal Revenue but later allowed by lower courts. The Supreme Court reversed these decisions, ruling that such payments were not ordinary or necessary expenses incurred in carrying out trade or business operations but rather capital transactions altering corporate structures and equity relationships among shareholders. Therefore, they were non-deductible for federal income tax purposes under existing law.

In the dissenting opinion for Helvering v. National Grocery Co., Justice Stone disagreed with the majority's interpretation of tax law. He argued that a corporation should not be taxed on money it has not yet received, even if it is guaranteed to receive that money in the future. In this case, he believed that National Grocery Company should only be taxed on its income from selling sugar once it had actually sold and delivered the sugar, rather than when it signed contracts promising to sell certain amounts of sugar at fixed prices in the future. According to Justice Stone, taxing unrealized gains was inconsistent with both legal precedent and common sense understandings of what constitutes income.