In the case of Jones, Collector of Internal Revenue v. Liberty Glass Co., 1947, the U.S Supreme Court was tasked with determining whether a taxpayer could deduct from gross income amounts paid as compensation for services rendered in prior years when those payments were not deductible under existing laws at that time. The dispute arose after Liberty Glass Company made retroactive salary payments to its officers and sought to deduct these amounts from their gross income. However, the Commissioner of Internal Revenue disallowed this deduction on grounds that it constituted an attempt to evade taxes by taking advantage of changes in tax rates. The court ruled against Liberty Glass Co., stating that deductions are a matter of legislative grace and taxpayers have no right to them unless explicitly provided by law. It held that since there was no provision allowing for such deductions during the years when services were rendered, they couldn't be deducted later even if laws had changed subsequently. This decision reinforced principles relating to timing and consistency in taxation.

In the dissenting opinion for Jones v. Liberty Glass Co., Justice Frankfurter disagreed with the majority's interpretation of Section 22(d) of the Revenue Act, arguing that it was not intended to provide a tax exemption for corporations in cases where they received dividends from other companies. He contended that this provision was meant to prevent double taxation on corporate profits, but only when those profits were distributed as dividends to individual shareholders - not when they were passed between corporations. The justice argued that allowing such an exemption would create a loophole enabling corporations to avoid paying taxes by simply transferring their earnings back and forth among themselves. This, he believed, contradicted Congress' intent in creating Section 22(d). Therefore, he concluded that Liberty Glass Company should be required to pay taxes on its dividend income from another corporation.