In the case of Helvering v. Watts, 1935, the U.S Supreme Court was tasked with determining whether a trust fund's income could be taxed as part of an individual's gross income under Section 22(a) of the Revenue Act of 1928. The respondent, Mrs. Watts had established a trust for her son and retained control over it during her lifetime or until she remarried. She also reserved to herself all net income from the property in question during her life or widowhood and gave herself power to revoke any provision at will except that relating to payment on death or remarriage. The Commissioner argued that since Mrs.Watts held significant control over this trust fund and its assets, its revenue should be considered part of her taxable gross income under section 22(a). However, Mrs.Watts contended that she did not have enough dominion over these funds for them to constitute taxable possession. Upon review by Justice Cardozo who delivered the opinion for unanimous court decision (9-0), it was determined that despite retaining certain powers such as revocation rights and receiving benefits from said trusts' incomes; they were insufficiently absolute so as not constituting ownership thus making their revenues non-taxable parts of one’s personal gross income.

In the dissenting opinion for Helvering v. Watts, Justice Stone argued that the majority's decision was based on a misinterpretation of tax law and precedent. He contended that Mrs. Watts' income from her late husband's trust should not be considered taxable under federal law because she did not have full control over it or its disposition; rather, she only received an annuity from it during her lifetime with no power to dispose of any part of the principal sum in favor of herself or anyone else. The remainder after her death would go to other beneficiaries as directed by Mr.Watts’ will which is beyond Mrs.Watts’ control and hence should not be taxed upon her estate according to him. Justice Stone further criticized his colleagues for ignoring previous court decisions where similar circumstances were ruled non-taxable, stating they had "overthrown" established principles without providing sufficient reasoning for doing so. He concluded by expressing concern about how this ruling might affect future cases involving trusts and estates, warning that it could lead to unjust taxation on funds individuals do not truly possess or control.