In the case of Old Mission Portland Cement Co. v. Helvering, Commissioner of Internal Revenue, 1934, the U.S Supreme Court was tasked with determining whether or not a corporation could deduct from its gross income amounts paid to its shareholders as dividends in liquidation under Section 234(a)(2) and (5) of the Revenue Act of 1921. The court ruled against Old Mission Portland Cement Co., stating that such payments were not deductible because they did not constitute "ordinary and necessary" business expenses according to tax law at that time. Instead, these payments were seen as distributions made on account of stock ownership rather than for services rendered or other legitimate business purposes which would have qualified them for deduction under existing laws.

In the dissenting opinion for Old Mission Portland Cement Co. v. Helvering, it was argued that the majority's decision to disallow a deduction of dividends paid by the petitioner on its preferred stock from its gross income was incorrect. The dissent emphasized that these payments were made out of earnings and profits accumulated after February 28, 1913, which should make them eligible for deduction under Section 23 (p) (1) (A). It also pointed out that there is no provision in law or regulation stating such dividends are not deductible when they exceed current earnings and profits. Therefore, according to this view, as long as there are sufficient post-February 1913 earnings and profits available at any time during a taxable year to cover dividend payments made during that year - regardless if those funds have been depleted by losses later in the same year - those dividends should be considered fully deductible.