In the Palmer v. Commissioner of Internal Revenue case in 1937, the U.S Supreme Court ruled on a tax dispute involving stock dividends. The petitioner, Mr. Palmer, received additional shares as a dividend from his company and sold them for profit. He argued that this income should be taxed at capital gains rates rather than ordinary income rates because he considered these shares to be part of his original investment in the company's common stock. The court disagreed with Mr.Palmer’s argument stating that under Section 115(f) of the Revenue Act of 1928, such dividends are not treated as capital assets but instead they are taxable as gross income regardless if it is paid out in cash or other property including stocks.The court held that when a corporation issues its own shares as dividends to its shareholders, those new shares do not constitute payment "in kind" and therefore cannot qualify for lower capital gains tax treatment. This decision clarified how stock dividends should be treated under federal tax law and established an important precedent regarding taxation rules applicable to corporate distributions.

In the dissenting opinion for Palmer v. Commissioner of Internal Revenue, Justice Cardozo disagreed with the majority's decision to allow a tax deduction for alimony payments. He argued that such payments should not be considered losses incurred in any transaction entered into for profit, as defined by Section 23(e) of the Revenue Act of 1928. Instead, he viewed them as personal expenses and therefore non-deductible under tax law. Furthermore, he contended that if Congress had intended to make alimony deductible it would have done so explicitly in legislation rather than leaving it up to interpretation by the courts.