In the case of Sherman et al. v. United States in 1930, the Supreme Court ruled on a matter concerning federal income tax law and its application to stock dividends. The plaintiffs, shareholders in a corporation that had issued them additional shares as a dividend, argued they should not be taxed for these dividends under the Revenue Act of 1916 because they did not increase their wealth or provide any actual income; rather it was simply an adjustment to their existing investment's form. However, the government contended that such dividends were taxable as income since they represented profits distributed among shareholders. The Supreme Court sided with the government’s interpretation and held that stock dividends are indeed subject to taxation under federal law. The court reasoned that even though no cash changed hands when issuing stock dividends, this action still increased each shareholder's potential for future gains by giving them control over more corporate assets than before - thus constituting "income" within meaning of Sixteenth Amendment.

In the dissenting opinion for Sherman et al. v. United States, Justice Holmes argued that the majority's decision was based on a misinterpretation of the law and an overreach of judicial power. He contended that it is not within the court's authority to decide whether or not a particular act constitutes entrapment, as this is a question for Congress to determine through legislation. Furthermore, he disagreed with the majority's view that entrapment occurs when government agents induce someone to commit an offense they would otherwise have been unlikely to commit; instead, he believed that entrapment should only be considered if there was coercion involved in inducing criminal behavior. In his view, simply providing opportunities or facilities for committing crimes does not constitute entrapment under existing laws.