In the case of Helvering, Commissioner of Internal Revenue v. Wilshire Oil Co., Inc., 1939, the U.S Supreme Court was tasked with determining whether or not a taxpayer could deduct from gross income amounts paid for drilling and development costs as ordinary and necessary business expenses under section 23(a) of the Revenue Act. The court ruled in favor of Helvering, stating that these expenditures were capital investments rather than deductible business expenses. This decision clarified that such costs should be capitalized over time instead of being immediately deducted from taxable income. The ruling emphasized that even though these payments might benefit operations in subsequent years, they are still considered capital outlays since they create or enhance what is essentially a separate asset - oil wells - which have their own useful life extending substantially beyond the taxable year.

In the dissenting opinion for Helvering v. Wilshire Oil Co., Justice McReynolds disagreed with the majority's interpretation of Section 113(a)(8) and (b)(1)(B) of the Revenue Act of 1932. He argued that these sections should not be read to allow a depletion allowance on oil produced from leased properties, as this would result in an unjustified windfall for lessees at the expense of lessors who actually owned the oil deposits. According to him, Congress intended to provide relief only for those who bore actual risk and investment in extracting natural resources, which did not include mere leaseholders like Wilshire Oil Company. Therefore, he believed that allowing such companies to claim depletion allowances was contrary both to statutory text and legislative intent.