In the case of North American Oil Consolidated v. Burnet, Commissioner of Internal Revenue (1931), the U.S Supreme Court was tasked with determining whether a taxpayer could claim a deduction for an oil well that had become worthless during the tax year. The court ruled in favor of Burnet, stating that under Section 234(a)(7) of the Revenue Act 1918, deductions were only permissible when there was evidence to prove total worthlessness within that taxable year. In this instance, North American Oil Consolidated failed to provide sufficient proof demonstrating their oil wells became entirely worthless within one specific tax year and therefore couldn't claim any deductions on them. This ruling established precedent regarding how taxpayers must demonstrate worthlessness in order to qualify for certain types of deductions.

In the dissenting opinion for North American Oil Consolidated v. Burnet, it was argued that the majority's decision contradicted established principles of tax law and ignored the realities of business operations. The dissent contended that a corporation should not be taxed on income derived from assets until those assets are sold or otherwise disposed of, as this is when actual profit is realized. They disagreed with taxing unrealized appreciation in asset value, arguing it could result in corporations being taxed on hypothetical gains rather than actual profits. Furthermore, they warned against setting a precedent where businesses might have to pay taxes based on fluctuating market values rather than concrete transactions - an approach they deemed unfair and unworkable.