In the case of Lynch v. Tilden Produce Company in 1923, the Supreme Court ruled on a dispute regarding tax law. The Tilden Produce Company had paid an excess profits tax under protest and then sued for a refund, arguing that certain deductions should have been allowed which would have reduced their taxable income. The lower courts agreed with Tilden and ordered a refund to be issued by the Collector of Internal Revenue (Lynch). However, before this could occur, Lynch died and his executrix appealed to the Supreme Court. The main issue was whether or not interest accrued on government bonds owned by Tilden should be included as part of its gross income for taxation purposes. The court held that it should not because such interest is exempt from federal taxation under U.S law. Additionally, they addressed whether losses incurred due to selling property below cost price can be deducted from gross income when calculating taxes owed; again siding with Tilden's argument that these losses are deductible expenses. Thusly ruling in favor of the company over both issues led them affirming lower court decisions ordering refunds for excessive taxes collected.

In the dissenting opinion for Lynch v. Tilden Produce Company, Justice Holmes argued that the majority's decision was inconsistent with previous rulings of the court and failed to properly interpret tax law. He contended that a taxpayer should not be allowed to deduct losses from their income if those losses were covered by insurance, as this would amount to double recovery. In his view, allowing such deductions would undermine the purpose of taxation and unfairly benefit certain taxpayers at the expense of others. Furthermore, he disagreed with the majority's interpretation of "realized" loss in relation to insurance payments received after a taxable year had ended but before filing taxes for that year. According to him, these payments should be considered part of gross income in order to accurately reflect financial reality rather than relying on arbitrary timelines set by tax laws.