In the case of Nicholas, Trustee v. United States in 1965, the Supreme Court ruled on a dispute involving federal income tax law. The trustee for two trusts had sold stock and then repurchased it within a month to create a loss for tax purposes, while still maintaining control over the shares. This practice is known as "wash sales." According to Section 108 of the Internal Revenue Code at that time, losses from wash sales were not recognized for tax purposes if they occurred within 30 days before or after acquiring substantially identical stocks or securities. However, this provision did not explicitly apply to trusts. The IRS disallowed these claimed losses based on its interpretation that Congress intended Section 108's prohibition against recognizing such losses to apply broadly across all taxpayers including trusts. The trustee argued that since trusts weren't specifically mentioned in Section 108’s language about who was subject to its provisions; therefore it should be exempted. However, the Supreme Court sided with the IRS by upholding lower court rulings which stated that despite lack of explicit mention of trust in section 108's language; Congressional intent was clear enough - prohibiting recognition of artificial losses created through wash sale transactions regardless whether taxpayer involved is an individual or trust.

In the dissenting opinion for Nicholas, Trustee v. United States, Justice Harlan argued that the majority's decision to allow a tax deduction for theft losses in the year they were discovered rather than when they occurred was inconsistent with both legislative intent and previous court rulings. He contended that Congress intended such deductions to be taken in the year of loss occurrence as it would provide taxpayers with greater certainty about their liabilities. Furthermore, he pointed out that this interpretation had been upheld by lower courts and even by Supreme Court precedent itself. In his view, allowing deductions based on discovery could lead to arbitrary results because different taxpayers might discover similar losses at different times due to varying circumstances or diligence levels.