In the case of Miles v. Safe Deposit & Trust Company of Baltimore, 1921, the Supreme Court was tasked with determining whether a federal estate tax could be levied on property transferred by a decedent prior to death but intended to take effect only after their passing. The decedent in question had transferred bonds and stocks into an irrevocable trust for his children, retaining life income from these assets until his death. After he passed away, the Collector of Internal Revenue assessed an estate tax on this property which was contested by Safe Deposit & Trust Company as guardian for one beneficiary child. The Supreme Court ruled that such transfers were indeed subject to federal estate taxes under existing law at that time because they represented interests "intended to take effect in possession or enjoyment at or after" the transferor's death according to Section 402(c) of Revenue Act (1918). This decision clarified how certain types of trusts should be treated for taxation purposes when it comes to assessing potential liability upon a person's demise.

In the dissenting opinion for Miles v. Safe Deposit & Trust Company of Baltimore, it was argued that the majority's decision to exempt state bonds from federal income tax contradicted previous court rulings and undermined Congress' power to levy taxes. The dissent emphasized that there is no constitutional provision explicitly protecting state bonds from federal taxation, and therefore such an exemption should not be judicially created. It was further contended that this ruling could lead to a dangerous precedent where states could issue unlimited amounts of tax-free securities, potentially destabilizing national finances by undermining the market for federally taxed securities. The dissent concluded by expressing concern over potential abuses arising from this new exemption and its impact on future fiscal policy decisions.