In the 1921 case of Knox v. McElligott, the U.S. Supreme Court ruled on a dispute involving estate taxes and charitable donations. The executor of an estate had made significant contributions to charity after the death of the testator but before filing federal tax returns for that year, claiming these as deductions from gross income under applicable law at that time. However, this was disputed by a collector for Internal Revenue who argued such deductions were not permissible because they were not part of administrative expenses or losses incurred during settlement process nor bequests made out directly in wills or trusts which are exempted from taxation according to existing laws then. The court sided with the government's interpretation ruling that posthumous charitable donations could not be deducted from an estate’s taxable value unless explicitly stated in a will or trust document; otherwise it would undermine intent behind inheritance tax laws designed to prevent wealth concentration through intergenerational transfers while promoting philanthropy via incentivizing testamentary gifts.

The dissenting opinion in the Knox v. McElligott case argued that the estate tax should not be applied to property transferred before the enactment of a certain law, even if death occurred after its passage. The justice believed this interpretation was consistent with both constitutional and statutory principles, as well as precedent cases. He contended that applying an estate tax retroactively would violate due process rights under the Fifth Amendment because it would deprive individuals of their property without fair warning or opportunity for defense. Furthermore, he asserted that Congress did not intend for such retrospective application when they passed the Revenue Act of 1916 which imposed taxes on estates rather than inheritances.