In Phelps v. United States, the Supreme Court ruled on a case involving the interpretation of tax laws and their application to stock dividends. The court held that stock dividends were not taxable income under the Revenue Act of 1916 because they did not constitute an actual gain or increase in wealth for shareholders but rather represented a rearrangement of capital within a corporation. This decision was based on previous rulings which established that only realized gains could be taxed as income, and since no cash or property changed hands when stocks were issued as dividends, there was no realization event to trigger taxation. However, this ruling was later overturned by Congress with the passage of new legislation clarifying that stock dividends are indeed subject to taxation.

In the dissenting opinion for Phelps v. United States, Justice Oliver Wendell Holmes Jr. argued that the majority's decision was based on an overly narrow interpretation of the Sherman Antitrust Act. He contended that a broader reading of the law would have allowed it to apply to labor unions and their activities, as well as corporations and businesses. According to Justice Holmes, if a group or organization uses its collective power in ways that restrict competition or manipulate market conditions - whether it is a union negotiating wages or a corporation setting prices - they are engaging in behavior that should be considered anti-competitive under federal antitrust laws. Therefore, he disagreed with the majority's ruling which exempted labor unions from these laws.