The U.S. Supreme Court case Lucas v. American Code Company, Inc., in 1929 revolved around the issue of taxation on corporate stock dividends. The American Code Company had issued a dividend to its shareholders out of capital surplus rather than from profits or income and argued that this should not be taxable as income under the Revenue Act of 1921. However, Commissioner Guy T. Helvering (then known as Lucas) disagreed with this interpretation and sought to tax it accordingly. In their decision, the Supreme Court sided with Lucas stating that even though these dividends were paid out from capital surplus instead of profit or income, they still constituted taxable income for shareholders under federal law at that time because they increased each shareholder's proportionate share value in the company’s assets which was equivalent to receiving cash payment. This landmark ruling established an important precedent regarding how corporations distribute earnings and profits among their shareholders for tax purposes - essentially broadening what could be considered 'income' subject to taxation.

In the dissenting opinion for Lucas v. American Code Company, Inc., Justice Stone argued that the majority's decision was inconsistent with previous rulings and interpretations of tax law. He contended that a corporation should not be taxed on dividends received from another company if it had no control over how those dividends were distributed or used. In his view, taxing such passive income was unfair and contrary to the intent of Congress when it enacted corporate tax laws. Furthermore, he believed that this interpretation could lead to double taxation - once when the distributing corporation earned its profits and again when those profits were passed on as dividends to shareholders who had no say in their distribution or use.