In the case of Johnson & Higgins of California v. United States in 1932, the U.S Supreme Court was tasked with determining whether a marine insurance broker who received commissions from foreign underwriters for placing insurance on American vessels should be considered as an agent of such underwriters and therefore liable to pay income tax. The court held that since the brokers were not legally bound by any fiduciary duties towards these foreign insurers, they could not be regarded as agents. Instead, their relationship was more akin to independent contractors or middlemen facilitating transactions between two parties - ship owners and insurers. Therefore, they were exempted from paying taxes on their commission earnings derived from these activities.

In the dissenting opinion for Johnson & Higgins of California v. United States, Justice McReynolds disagreed with the majority's interpretation of "broker" in Section 402 of the Revenue Act of 1921. He argued that a broker is someone who negotiates between two parties and does not have any personal interest in transactions they facilitate. In this case, he believed that Johnson & Higgins acted as brokers when negotiating insurance contracts on behalf of their clients and should therefore be exempt from taxation under Section 402. The justice also contended that Congress did not intend to tax such activities because it would discourage businesses from seeking professional advice and services, which could negatively impact commerce overall.