In the case of Putnam et ux. v. Commissioner of Internal Revenue, 1956, the U.S Supreme Court was tasked with determining whether a taxpayer could deduct losses from their income tax return that were incurred due to embezzlement by an employee. The petitioner, Mrs. Putnam, had suffered significant financial loss when her broker misappropriated funds she had invested in stocks and bonds through him for his own personal use without her knowledge or consent. The court ruled against Mrs. Putnam's claim on the grounds that such losses did not qualify as "theft" under Section 23(e)(3) of the Internal Revenue Code which allows deductions for losses arising from thefts during taxable years since embezzlement is considered a fraudulent appropriation of property by a person to whom it has been entrusted rather than outright theft. This decision established important precedent regarding what constitutes 'theft' within the context of tax law and clarified how these laws should be interpreted in relation to cases involving fraud or embezzlement.

In the dissenting opinion for Putnam et ux. v. Commissioner of Internal Revenue, it was argued that the majority's decision to tax a widow on her deceased husband's trust income was incorrect and unfair. The dissenting justices believed that under Massachusetts law, which governed this case, a surviving spouse does not have an absolute right to their deceased spouse’s trust income but only has access if needed for support and maintenance in accordance with their accustomed standard of living. Therefore, they contended that taxing Mrs. Putnam as though she had received all the trust income directly contradicted state law provisions regarding trusts and estates by treating potential discretionary distributions as actual ones subject to federal taxation - even when no such distribution occurred during the relevant tax year.