In Realty Holding Company v. Donaldson, the U.S Supreme Court was called upon to decide on a dispute involving property rights and tax assessments. The plaintiff, Realty Holding Company, argued that it had been unfairly taxed by the defendant, Donaldson who was acting as Tax Commissioner of New York State. The company claimed that its property had been assessed at an inflated value which resulted in higher taxes than were justified under state law. However, the court ruled against them stating that there was no constitutional violation in this case because all properties within a given class are uniformly assessed for taxation purposes according to their fair market value. This decision upheld the principle of uniformity in tax assessment and reinforced states' authority over local taxation matters.

In the dissenting opinion for Realty Holding Company v. Donaldson, Justice McReynolds argued that the majority's decision to uphold a tax on gifts of property was unconstitutional. He contended that such a tax is not an excise or duty but rather a direct tax, which must be apportioned among states according to their populations as per Article I, Section 9 of the U.S Constitution. He further asserted that this ruling contradicted previous decisions by the court and violated principles established in Pollock v. Farmers' Loan & Trust Co., where it was held that taxes on income from property are direct taxes and thus subject to apportionment rules. In his view, allowing Congress to impose unapportioned gift taxes would open up possibilities for other forms of taxation without constitutional limits or safeguards against potential abuses.