In the 1935 case of Helvering v. Salvage, the U.S Supreme Court ruled on a matter concerning income tax and stock dividends. The respondent, Mrs. Salvage, received a dividend in preferred stock from her owned common stock in an oil company during 1919 when no federal law taxed such transactions as income. However, she sold this dividend in 1920 after Congress had passed Revenue Act of 1918 which made these types of dividends taxable as income upon sale or disposition. She argued that taxing it was unconstitutional because it amounted to retroactive taxation since she acquired the stocks before enactment of the law. The court disagreed with her argument and upheld that under Revenue Act of 1918, any gain realized by taxpayer from sales or other dispositions should be included in gross income for year where transaction occurred regardless if property disposed off was acquired before passage of act; thus making her liable for taxes on profits earned from selling those shares.

In the dissenting opinion for Helvering v. Salvage, Justice Stone argued that the majority's interpretation of Section 22(a) of the Revenue Act was incorrect and overly broad. He contended that this section should not be interpreted to include gifts as gross income because it would contradict Congress' intent when drafting tax laws. According to him, if Congress had intended for gifts to be included in gross income, they would have explicitly stated so in their legislation. Furthermore, he pointed out that there is a clear distinction between earnings from labor or investments (which are taxable) and gratuitous transfers like inheritances or gifts (which traditionally aren't). Therefore, he believed that Mrs. Salvage’s gift from her husband should not have been considered part of her taxable income.