In the 1940 case of Helvering v. Richter, the United States Supreme Court ruled on a matter concerning income tax law. The respondent, Richter, had received dividends from a corporation in which he was both an officer and shareholder. These dividends were paid out of earnings accumulated before 1913 - prior to when federal income taxes were imposed by the Sixteenth Amendment. The Commissioner of Internal Revenue argued that these dividends should be considered taxable income under Section 115(a) and (g) of the Revenue Act of 1934 despite their pre-1913 origin. In contrast, Richter contended they should not be taxed as they derived from corporate earnings amassed before there was any federal income tax obligation. The Supreme Court sided with the Commissioner's interpretation that such distributions are indeed subject to taxation regardless of when those profits were initially earned by corporations because it is upon receipt that shareholders realize gain or loss for tax purposes.

In the dissenting opinion for Helvering v. Richter, Justice McReynolds disagreed with the majority's interpretation of Section 22(a) of the Revenue Act. He argued that this section should not be interpreted to include gifts in gross income because it would contradict Congress' intent when they enacted a separate gift tax in 1924 and then repealed it two years later due to constitutional concerns. According to him, if Congress had intended for gifts to be included in gross income, they wouldn't have needed a separate gift tax or its subsequent repeal. Therefore, he believed that interpreting Section 22(a) as including gifts was an overreach by the Court and went against legislative history and intent.