In the case of John K. & Catherine S. Mullen Benevolent Corp v United States (1933), the U.S Supreme Court ruled on whether a corporation could be considered charitable and thus exempt from federal income tax under Section 231(6) of the Revenue Act of 1921, despite its earnings being used to pay dividends to stockholders. The court held that while a corporation may engage in benevolent activities, it cannot be classified as a charitable organization if its profits are distributed among shareholders rather than being used for furthering its stated benevolent purpose. In this particular case, although the Mullen Corporation was established with an ostensibly philanthropic mission - providing low-cost housing for elderly people - it also paid out dividends to stockholders from rental income received. Therefore, according to Justice Benjamin Cardozo who delivered the opinion of the court, such distribution disqualified it from claiming exemption as a charitable institution under federal law.

In the dissenting opinion for Mullen Benevolent Corp. v. United States, Justice Cardozo argued that the corporation's primary purpose was not to make a profit but to provide affordable housing for low-income individuals and families, which should be considered charitable in nature and therefore exempt from taxation under Section 231(6) of the Revenue Act of 1921. He pointed out that while some tenants paid rent above cost, others paid less than cost or nothing at all - an arrangement he believed demonstrated a benevolent intent rather than commercial enterprise. Furthermore, he noted that any profits were used to maintain and improve properties rather than being distributed among shareholders as dividends. In his view, this case presented an opportunity for the court to clarify what constitutes "charitable" in terms of tax exemption law; however, by ruling against Mullen Benevolent Corporation it had failed to do so.