The U.S. Supreme Court case Planters Cotton Oil Co., Inc., et al. v. Hopkins, Collector of Internal Revenue in 1931 revolved around the issue of tax deductions for losses incurred by a corporation due to the sale or exchange of capital assets under Section 101(b) and (c) of the Revenue Act of 1928. The petitioner, Planters Cotton Oil Company, had sold cottonseed oil futures contracts at a loss during that year and claimed these as ordinary business losses on their income tax return rather than capital losses which are subject to limitations on deductibility. However, this was disputed by the respondent who argued that such transactions were sales or exchanges of capital assets resulting in capital losses only partially deductible from gross income under section 101(c). The court ruled in favor of Hopkins stating that these transactions constituted sales or exchanges within meaning given those terms by Congress when it enacted sections defining net income and providing for deduction therefrom certain percentages only where loss resulted from sale or exchange.

In the dissenting opinion for Planters Cotton Oil Co., Inc. v. Hopkins, it was argued that the majority's interpretation of the Revenue Act of 1918 was incorrect and overly broad. The dissenting justices believed that Congress did not intend to tax as income any increase in value of property held by a corporation until such time as this increase is realized through sale or other disposition. They felt that unrealized appreciation should not be considered taxable income under existing law because it does not represent an actual gain but merely a potential one, which may never materialize due to market fluctuations or other factors beyond control of the taxpayer. Furthermore, they contended that taxing unrealized gains would create undue hardship on corporations and could potentially lead to insolvency if these entities were required to pay taxes on assets whose value had increased but which they still owned and thus could not use to generate cash needed for tax payments.