In the 1935 case of McCaughn v. Real Estate Land Title & Trust Co., the U.S Supreme Court ruled on a dispute involving estate tax law. The issue at hand was whether or not stock owned by a deceased person, but held in trust and located outside of the United States, should be subject to federal estate taxes. The court ultimately decided that such stocks were indeed taxable under U.S law, even though they were physically located abroad. This decision reinforced the principle that for taxation purposes, property ownership is determined by legal control rather than physical location.

In the dissenting opinion for McCaughn v. Real Estate Land Title & Trust Co., Justice Stone argued that the federal estate tax should not apply to property transferred before death, but only taking effect upon death (known as "transfers in contemplation of death"). He contended that such transfers were essentially gifts and therefore outside the scope of an estate tax. In his view, Congress had exceeded its constitutional authority by imposing a tax on inter vivos transfers under the guise of an estate tax. He also expressed concern about potential double taxation if both gift and estate taxes could be applied to these types of transfers. Ultimately, he believed this interpretation was more consistent with legislative intent and historical practice.