In the case of McCoach, Collector of Internal Revenue, v. Pratt, Executor of Dree (1914), the United States Supreme Court was tasked with determining whether or not a Pennsylvania inheritance tax could be deducted from an estate's gross value before calculating federal estate taxes. The executor of the deceased's will argued that it should be allowed as a deduction under federal law. However, the Collector of Internal Revenue disagreed and assessed additional taxes based on his interpretation that state inheritance taxes were not deductible when calculating federal estate tax liability. The Supreme Court sided with Pratt (the executor) and held that state-level inheritance taxes are indeed deductible from an estate’s gross value for purposes of assessing federal taxation levels. This ruling established precedent in interpreting how to calculate net taxable estates for purposes related to Federal Estate Taxes - specifically regarding deductions pertaining to State Inheritance Taxes.

The dissenting opinion in the case of McCoach v. Pratt argued that the estate tax should not be applied to life insurance proceeds paid upon death, as they were not part of the decedent's gross estate. The justice contended that such an interpretation was consistent with both legislative intent and precedent set by previous court decisions. He further asserted that life insurance policies are contracts between two parties - the insurer and insured - where premiums are exchanged for a future payout, thus making them distinct from property transferred at death. Therefore, he believed it was incorrect to classify these payouts as transfers occurring at or after death subject to taxation under federal law.