In the 1964 case of King, Executrix, et al. v. United States, the U.S Supreme Court was asked to determine whether a taxpayer could deduct from gross income an amount paid as compensation for personal injuries under Section 104(a)(2) of the Internal Revenue Code of 1954. The plaintiff had received $125,000 in settlement after suing her former employer for invasion of privacy and defamation following her dismissal from employment based on false accusations about her character and conduct. The IRS contended that this sum was taxable income while Mrs. King argued it should be considered damages exempted from taxation by Section 104(a)(2). The court ruled in favor of Mrs.King stating that payments made on account of "personal injuries or sickness" were not included in gross income according to section 104 (a) (2), thus they are non-taxable regardless if they were compensatory or punitive damages.

In the dissenting opinion for King v. United States, Justice Harlan argued that the majority's interpretation of Section 3466 of the Revised Statutes was incorrect and inconsistent with its historical context. He contended that this statute, which gives priority to federal claims in cases where a debtor dies insolvent, should not apply when there are sufficient assets to cover all debts. Instead, he believed it should only be invoked when an estate is insufficient to pay off all creditors - a situation not applicable in this case as Mrs. King’s estate had enough funds to satisfy both state and federal tax claims. Furthermore, Justice Harlan criticized the majority's reliance on precedents from lower courts rather than Supreme Court decisions or Congressional intent behind Section 3466 itself.