In Rutkin v. United States, the Supreme Court ruled that extorted money is considered taxable income under the Internal Revenue Code. The case involved Irving Rutkin who had been convicted of tax evasion for failing to report $250,000 he received through extortion as part of his gross income in 1943. He argued that this sum was not "income" within the meaning of Section 22(a) of the Internal Revenue Code and therefore should not be taxed. However, a majority decision by Justice Stanley Reed held that even illegally obtained funds are subject to taxation if they constitute an undeniable accession to wealth over which a taxpayer has complete dominion; thus affirming Rutkin's conviction.

In the dissenting opinion for Rutkin v. United States, Justice Jackson argued that the majority's decision to tax extorted money as income was a dangerous expansion of what could be considered taxable under law. He contended that this interpretation would allow any unlawful gains to be taxed and potentially lead to double punishment - once through taxation and again through criminal penalties. Furthermore, he asserted that such an approach contradicted previous court rulings which had established clear boundaries between lawful and unlawful income in terms of taxation. In his view, extortion money should not qualify as gross income because it is obtained illegally without consent from the victim; thus, it does not constitute a gain or profit in any meaningful sense.