In the case of Sage et al., Executors of Sage, v. United States in 1918, the U.S Supreme Court was tasked with deciding whether or not a federal estate tax could be levied on property transferred before death but intended to take effect after death. The executors of Russell Sage's will argued that such transfers were not subject to taxation under the Revenue Act of 1916 because they did not fall within its definition of "gross estate." However, the government contended that these transfers were indeed taxable as they constituted an attempt to evade taxes by transferring assets prior to death while retaining control over them until demise. The court sided with the government and held that such transfers are subject to federal estate tax as per Section 202(b) and (c) of Revenue Act since it is essentially a transfer made in contemplation of death even though actual possession or enjoyment was postponed till then. This ruling clarified how pre-death asset transfers would be treated for purposes of federal taxation.

In the dissenting opinion for Sage et al., Executors of Sage, v. United States, Justice Holmes disagreed with the majority's decision to tax a life insurance policy under federal estate tax law. He argued that such policies should not be considered part of an individual's gross estate because they are fundamentally different from other assets and property. According to Holmes, life insurance is essentially a contract between two parties - the insurer and insured - where premiums are paid in exchange for a future payout upon death. The beneficiary does not have control over this asset during the lifetime of the insured person; therefore it cannot be treated as part of their taxable estate. Furthermore, he contended that taxing these proceeds would discourage people from obtaining life insurance which serves important social functions like providing financial security for families after death.