The U.S. Supreme Court case National Lead Co. v. Commissioner of Internal Revenue in 1956 revolved around the issue of tax deductions for expenses related to research and development (R&D). The National Lead Company claimed that its R&D expenditures should be considered as current expenses, thus deductible from their taxable income under Section 23(r) of the Internal Revenue Code. However, the Commissioner of Internal Revenue argued these were capital expenditures and not immediately deductible but instead should be amortized over a period reflecting their useful life. The Supreme Court ruled in favor of the National Lead Company, stating that R&D costs are indeed ordinary business expenses eligible for immediate deduction rather than capital investments requiring amortization over time. This decision was based on an interpretation that such costs do not create or enhance separate and distinct additional assets but contribute to improvement or maintenance of existing operations.

In the dissenting opinion for National Lead Co. v. Commissioner of Internal Revenue, it was argued that the majority's decision to allow a deduction for expenses related to stock options granted to employees contradicted previous court rulings and tax regulations. The dissenting justices believed that such deductions should only be allowed when there is an actual outlay of funds by the company or a clear loss in assets, neither of which occurred in this case as no money changed hands until an employee decided to exercise their option. They also pointed out that allowing these deductions could lead companies to manipulate their taxable income through strategic timing of granting and exercising stock options, undermining the integrity of corporate taxation system.