In the case of Schlude et ux. v. Commissioner of Internal Revenue, 1962, the U.S Supreme Court ruled on whether income from installment sales could be taxed in full at the time of sale or spread out over several years as payments were received by taxpayers who used an accrual method for their accounting practices. The court held that under Section 44(d) and (e) of the Internal Revenue Code, taxpayers using an accrival basis must report all income from such sales in the year they are made regardless if payment is not yet fully received. This decision reversed a previous ruling by a lower court which allowed deferral of tax liability until cash was actually collected.

In the dissenting opinion for Schlude et ux. v. Commissioner of Internal Revenue, Justice Hugo Black argued that the majority's decision to allow income tax on prepayment for services not yet rendered was a departure from established principles of income taxation. He contended that this ruling could potentially lead to unfair and burdensome taxation on businesses who receive advance payments but have not yet incurred any expenses or performed any services related to those payments. Furthermore, he expressed concern about the potential administrative difficulties in determining when exactly an amount becomes taxable under this new rule, particularly in cases where it is unclear whether a service will be provided at all due to unforeseen circumstances such as death or bankruptcy.