The Macallen Company v. Massachusetts case in 1928 revolved around the constitutionality of a state tax on intangible property held by a corporation for income-producing purposes. The Macallen Company, incorporated in Massachusetts, owned bonds issued by out-of-state corporations and municipalities which were exempt from taxation under local laws where they were issued. However, Massachusetts imposed an excise tax on these holdings as part of the company's corporate franchise tax assessment. The Supreme Court upheld this action stating that it did not violate either the Due Process Clause or Commerce Clause of the Constitution. It ruled that states have authority to levy taxes on corporations chartered within their borders and can include all assets contributing to income generation in calculating such taxes - even if those assets are located outside state boundaries or consist of securities exempted from direct taxation elsewhere. This decision affirmed states' rights to impose corporate franchise taxes based upon total net worth including intangibles like bond holdings regardless of their origin or nature.

In the dissenting opinion for The Macallen Company v. Massachusetts, Justice Holmes disagreed with the majority's decision that a state tax on income derived from federal securities was unconstitutional. He argued that such a tax did not infrive upon federal sovereignty as it didn't directly affect the operations of the government or its financial institutions. Instead, he viewed this as an indirect effect and therefore permissible under constitutional law. Furthermore, he contended that if every action by a state which indirectly affected U.S Government were deemed unconstitutional then many other taxes would also have to be invalidated leading to absurd results. In his view, there should be no difference between taxing income from any source whether it is corporate dividends or interest on government bonds; both are forms of property rights and thus subject to taxation by states.