In the case of Knights v. Jackson, Treasurer and Receiver General in 1922, the U.S Supreme Court was tasked with determining whether a Massachusetts law that taxed stock dividends as income violated the Fourteenth Amendment's Due Process Clause. The plaintiff, Knights, argued that this tax was unconstitutional because it resulted in double taxation: once when corporate profits were taxed and again when those profits were distributed to shareholders as dividends. However, the court ruled against Knights stating that there is no constitutional prohibition on double taxation. They reasoned that corporations and their shareholders are separate entities under law; therefore each can be subjected to different taxes without violating due process rights. This decision upheld Massachusetts' right to levy an income tax on stock dividends.

The dissenting opinion in the case of Knights v. Jackson, Treasurer and Receiver General, 1922 argued that the Massachusetts law taxing stock dividends as income was unconstitutional. The dissenters believed that this tax violated the Fourteenth Amendment's due process clause because it did not take into account a corporation's capital gains or losses when determining its taxable income. They contended that by ignoring these factors, the state unfairly taxed shareholders on money they had never actually received. Furthermore, they asserted that such taxation could lead to double taxation if both corporate profits and shareholder dividends were subject to tax without any adjustment for capital changes. Thus, according to them, this method of taxation was arbitrary and capricious rather than fair and equitable.