The U.S. Supreme Court case Kansas City Southern Railway Company v. United States in 1919 revolved around the issue of whether a railway company could claim deductions for depreciation on its income tax return, despite not having made any actual repairs or replacements to its property during the taxable year. The Kansas City Southern Railway Company argued that it should be allowed to deduct an annual allowance for depreciation from its gross income, even though no physical deterioration had occurred and no expenditures were made towards repairs or renewals within that particular year. However, the Supreme Court ruled against this argument stating that under the Revenue Act of 1916 and Treasury Regulations No.33 (revised), such allowances are only permissible when they reflect actual wear and tear on property used in trade or business throughout the taxable year; mere theoretical estimates do not suffice as grounds for deduction claims. Therefore, without evidence of real damage or decay necessitating repair expenses incurred by a taxpayer within a given fiscal period, there can be no valid basis for claiming depreciation deductions.

In the dissenting opinion for Kansas City Southern Railway Company v. United States, Justice McReynolds disagreed with the majority's decision to uphold a federal law that allowed railroads to charge more for short hauls than long ones. He argued that this was an unconstitutional interference in private business and violated the Fifth Amendment's due process clause. According to him, Congress did not have unlimited power over interstate commerce and could not arbitrarily interfere with reasonable rates set by railroad companies based on their own economic considerations. Furthermore, he contended that there was no evidence of public harm or unfair practices necessitating such regulation; instead it seemed like an attempt by Congress to favor certain localities at the expense of others which is beyond its constitutional authority.