In Redmond et ux. v. United States (1965), the Supreme Court ruled on a case involving federal income tax law and its application to property transactions between spouses during divorce proceedings. The petitioners, Mr. and Mrs. Redmond, had divorced in 1957 with an agreement that Mr. Redmond would transfer certain properties to his ex-wife as part of their settlement; she then sold these properties for a profit in subsequent years but did not report this income on her taxes under the assumption it was non-taxable due to being acquired through divorce proceedings rather than purchase or investment. The Internal Revenue Service disagreed with this interpretation and assessed deficiencies against her for those years based on capital gains from the sales of these properties, leading to legal action culminating at the Supreme Court level. The court sided with the IRS's interpretation of tax law, ruling that Mrs.Redmond owed taxes on profits made from selling assets received in a divorce settlement because they were considered taxable gain under Section 1001(c) of Internal Revenue Code.

In the dissenting opinion for Redmond et ux. v. United States, 1965, it was argued that the majority's decision to uphold a tax assessment on income from property sold by the petitioners contradicted established legal principles regarding capital gains and losses. The dissenting justices contended that under existing law, if an individual sells property at a loss and then repurchases similar property within thirty days before or after the sale, they are not allowed to claim this as a deductible loss in their taxes - known as "wash sales". However, there is no equivalent provision preventing individuals from claiming profits made in similar circumstances as taxable income. Therefore, according to these justices' interpretation of current legislation and precedent cases such as Burnet v Logan (1931), since Mr Redmond had bought back his own promissory notes within six months of selling them at profit he should not be taxed on this gain because it would be inconsistent with how losses are treated under wash sale rules.