The Nichols v. Coolidge case in 1926 dealt with the issue of estate taxation. The Supreme Court ruled that a wife's interest in property transferred to her by her husband during his lifetime, but without relinquishing control over it, was not taxable upon his death under the federal estate tax law of 1916 and 1918. This decision was based on their interpretation of these laws which did not include such transfers within its definition of "gross estate". Furthermore, they held that retroactive application of an amendment to this law (Revenue Act of 1921) attempting to include such transfers would violate the Fifth Amendment’s due process clause as it constituted a taking without just compensation.

In the dissenting opinion for Nichols v. Coolidge, Justice Oliver Wendell Holmes Jr., joined by Justices Brandeis and Stone, argued that the majority's interpretation of the tax law was incorrect. They believed that Congress intended to tax all transfers made in contemplation of death as part of a decedent’s estate, regardless if they were revocable or irrevocable during their lifetime. The dissenters contended that Mrs. Coolidge's transfer of property into a trust should be considered taxable under this provision because it was done with an awareness she might die soon and wanted to avoid additional taxes on her estate upon her death. Therefore, they disagreed with the majority's decision not to include these assets in her gross estate for taxation purposes.