In the case of Jersey Shore State Bank v. United States, 1986, the U.S Supreme Court ruled on a dispute involving federal tax law and its application to banks. The issue at hand was whether or not banks could deduct from their taxable income the interest paid on time deposits (such as certificates of deposit) that were used for commercial lending purposes. The Internal Revenue Service (IRS) had previously allowed such deductions but changed its policy in 1969 without any changes in legislation by Congress. This led to several lawsuits by banks, including Jersey Shore State Bank. The court held that under Section 163(a) of the Internal Revenue Code, which allows a deduction for all interest paid within a taxable year on indebtedness, does apply to bank's payments of interest on customer deposits even though they are liabilities rather than loans because these funds are integral parts of their business operations and thus can be considered as costs incurred for earning profits. This decision reaffirmed an earlier ruling made by lower courts against IRS’s interpretation and upheld taxpayers' right to rely upon established interpretations until formally revoked or amended.

The dissenting opinion in the case of Jersey Shore State Bank v. United States argued that the majority's decision was inconsistent with previous rulings and misinterpreted federal law. The dissenters believed that a bank should not be held liable for tax evasion committed by its borrowers, especially when there is no evidence to suggest that the bank had any knowledge or involvement in such activities. They contended that holding banks responsible for their customers' actions would place an undue burden on financial institutions and could potentially disrupt banking operations nationwide. Furthermore, they disagreed with the majority's interpretation of "transferee" under federal tax law, arguing it was too broad and contrary to legislative intent.