In the case of New Colonial Ice Co., Inc. v. Helvering, Commissioner of Internal Revenue in 1933, the U.S Supreme Court ruled that a corporation's payment to satisfy personal liability for its president was not deductible as an ordinary and necessary business expense under section 234(a)(1) of the Revenue Act of 1928. The court held that such payments were not made primarily for business purposes but rather to protect or promote goodwill among stockholders who might otherwise have been required to bear these costs personally. Therefore, they could not be considered normal operating expenses eligible for tax deductions.

In the dissenting opinion for New Colonial Ice Co., Inc. v. Helvering, Commissioner of Internal Revenue, Justice Cardozo disagreed with the majority's decision that a corporation could not deduct from its income taxes money it paid to satisfy personal debts of its stockholders. He argued that such payments were ordinary and necessary business expenses because they helped maintain the company's reputation and credit standing in the community, which are crucial for any successful business operation. Furthermore, he contended that these payments should be considered losses incurred during taxable years under Section 23(e) of the Revenue Act of 1928 since they resulted from transactions entered into for profit but ended up causing financial harm to the corporation instead.