In the Shearer v. Burnet case of 1931, the United States Supreme Court ruled on a tax dispute involving an inheritance. The petitioner, Mrs. Shearer, had inherited property from her late husband in 1917 and sold it in 1920 at a profit. However, she did not include this profit as income on her federal tax return for that year because she believed it was exempt under existing laws regarding inheritances and bequests. The Commissioner of Internal Revenue disagreed with Mrs. Shearer's interpretation of the law and assessed additional taxes against her based on the profits from selling the property. This led to legal proceedings which eventually reached the Supreme Court. The court sided with Mrs.Shearer ruling that gains realized by a widow upon sale of real estate received by will or descent are capital gains rather than ordinary income; thus they should not have been included in gross income for purposes of computing net taxable income under Revenue Act Feb., 24th,1921. This decision clarified how certain types of inherited assets should be treated for taxation purposes when sold.

In the dissenting opinion for Shearer v. Burnet, it was argued that the majority's decision to tax Mrs. Shearer on her husband's income was unjust and inconsistent with previous rulings of the court. The dissent pointed out that under Maryland law, which governed this case, a wife had no legal right or claim to her husband’s earnings during his lifetime unless he chose to give them to her voluntarily. Therefore, taxing Mrs.Shearer on these earnings violated principles of fairness and equity because she did not have control over or access to this income in any meaningful way. Furthermore, they noted that if Mr.Shearer had chosen not to share his income with his wife but instead spent it all himself then there would be no question about whether it should be taxed as part of her gross income - clearly demonstrating an inconsistency in how such cases were being handled by the court.