The U.S. Supreme Court case Helvering v. Winmill in 1938 revolved around the issue of taxation on dividends received by a taxpayer from a corporation, which had not paid income tax on its earnings and profits for that year due to capital losses carried forward from previous years. The Commissioner of Internal Revenue argued that these dividends should be taxable as they were derived from corporate profits, while the respondent claimed they were non-taxable under Section 115(b) of the Revenue Act because no corporate taxes were paid for that year. The Supreme Court ruled in favor of the Commissioner, stating that whether or not a corporation pays income tax does not affect shareholders' liability to pay taxes on their dividend income. Therefore, even if corporations use provisions like loss carryforwards to offset their own tax liabilities, this does not exempt shareholders receiving dividends from paying individual income taxes.

In the dissenting opinion for Helvering v. Winmill, Justice Stone argued that the majority's interpretation of Section 22(a) of the Revenue Act was too broad and not in line with congressional intent. He contended that Congress intended to tax only realized gains and losses, not unrealized appreciation or depreciation in value. The majority’s decision to include stock dividends as taxable income under this section would mean taxing shareholders on wealth they have yet to receive, which he believed contradicted legislative intent. Furthermore, Justice Stone pointed out inconsistencies within their own ruling by noting that if a shareholder sold his original shares after receiving a dividend but before selling any new ones received through it, he wouldn't be taxed at all according to their logic - an outcome clearly contrary to what Congress had intended when drafting tax laws.