In the 1939 case of Helvering v. Wood, the United States Supreme Court addressed a dispute concerning federal income tax law. The respondent, Mr. Wood, had received dividends from his company and claimed them as capital gains on his taxes rather than regular income - this would have resulted in a lower tax rate for him. However, the Commissioner of Internal Revenue disagreed with this classification and argued that these dividends should be taxed as ordinary income instead of capital gains because they were paid out of earnings and profits accumulated after February 28th, 1913 (the effective date for taxing dividend distributions). The court sided with the Commissioner's interpretation by ruling that such dividends are taxable as ordinary income under Section 115(a) of the Revenue Act despite being designated by corporate resolution as coming from capital or surplus accounts created before March 1st, 1913.

In the dissenting opinion for Helvering v. Wood, Justice McReynolds argued that the majority's decision was a departure from established principles of law and an overreach of judicial power. He contended that the court had no authority to rewrite or reinterpret tax laws passed by Congress, as he believed they were doing in this case. According to him, it was not within their purview to decide whether a taxpayer should be allowed certain deductions based on their interpretation of what is "reasonable" or "normal". Instead, such determinations should be left solely to legislative bodies who have been given express powers by the Constitution to levy taxes and determine how they are assessed. In his view, any ambiguity in tax laws should be resolved in favor of taxpayers rather than against them because taxation is inherently burdensome and potentially oppressive if misused.