In McGuire v. United States, the Supreme Court examined whether a taxpayer could deduct losses from his income tax that were incurred due to embezzlement by an employee. The plaintiff, Mr. McGuire, owned a business and discovered one of his employees had been embezzling funds over several years. He sought to deduct these losses from his taxable income for the year he discovered them but was denied by the Commissioner of Internal Revenue on grounds that such deductions must be made in the year when they occurred rather than when they were discovered. The Supreme Court upheld this decision stating that while unfortunate for Mr. McGuire, it is consistent with existing law which requires taxpayers to account annually for gains and losses within each respective tax year without regard to subsequent events or discoveries after those periods have closed.

In the dissenting opinion for McGuire v. United States, Justice Oliver Wendell Holmes Jr. argued that the majority's interpretation of tax law was too narrow and failed to consider the broader implications of their decision. He disagreed with their conclusion that a husband could not be taxed on income from property transferred to his wife without consideration, arguing instead that such transfers should be considered taxable income because they effectively increase the wealth and economic power of the recipient. Holmes believed this approach would better align with Congress' intent in passing tax legislation and would prevent individuals from evading taxes through strategic property transfers.