In the Prairie State Bank v. United States case of 1896, the Supreme Court ruled on a dispute involving bank deposits and federal tax law. The Prairie State Bank had made a deposit with another bank that went bankrupt before it could return the funds. When calculating its own taxes, Prairie State Bank deducted this loss from its taxable income. However, the Internal Revenue Service (IRS) disagreed with this deduction and imposed additional taxes on the bank accordingly. The Supreme Court sided with IRS in this matter stating that under existing laws at that time, banks were not allowed to deduct losses resulting from deposits placed in other banks which subsequently failed or became insolvent.

In the dissenting opinion for Prairie State Bank v. United States, Justice Harlan argued that the majority's decision was inconsistent with previous rulings and established principles of law. He contended that a bank could not be held liable for taxes on capital stock when it had ceased to do business and its assets were in receivership. According to him, this would amount to double taxation as both the shareholders and corporation would be taxed separately on their respective interests in the same property. Furthermore, he disagreed with imposing tax liability based solely on statutory interpretation without considering whether such an imposition is just or equitable under common law principles. In his view, equity should prevail over strict construction of statutes especially where there are ambiguities or doubts about legislative intent.