In the case of Riddell v. Monolith Portland Cement Co., 1962, the U.S Supreme Court addressed whether or not a taxpayer could deduct from its gross income payments made to satisfy obligations under state law for injuries sustained by employees in accidents occurring off-premises and outside working hours. The court ruled that such payments were deductible as ordinary and necessary business expenses under section 23(a)(1)(A) of the Internal Revenue Code of 1939. The decision was based on California's workers' compensation laws which required employers to compensate their employees for any injury arising out of employment regardless of where it occurred or when it happened during an employee’s shift. Therefore, these costs were seen as part and parcel with carrying on trade or business within California, making them deductible expenses according to federal tax law.

In the dissenting opinion for Riddell v. Monolith Portland Cement Co., Justice Douglas argued that the majority's decision was inconsistent with previous rulings and interpretations of tax law. He contended that a taxpayer should not be allowed to deduct expenses related to maintaining property, as these are capital expenditures rather than ordinary business expenses. In this case, he disagreed with allowing Monolith Portland Cement Company to deduct costs associated with maintaining an aqueduct it did not own but had agreed to maintain in exchange for water rights. According to him, such maintenance costs were part of acquiring those water rights and therefore constituted a capital investment rather than deductible expense under Section 162(a) of Internal Revenue Code which allows deduction only for "ordinary and necessary" business expenses incurred during taxable year.