In the 1933 case of Smith v. United States, the U.S Supreme Court addressed a dispute over an Alaskan property transaction between Smith and the federal government. The government had seized Smith's land for nonpayment of taxes, but he argued that his property was exempt from taxation because it was not within any organized territory or state of America as required by law at that time. He also claimed that Alaska was only a district and not a territory or state under American jurisdiction when his land was taken away in 1920. The court ruled against Smith, stating that while Alaska may have been referred to as a "district" instead of a "territory," this did not change its legal status or relationship with the United States. Therefore, it held that properties located there were subject to federal tax laws just like those in other territories or states. This decision affirmed lower courts' rulings which maintained governmental authority over unorganized territories such as Alaska during this period.

In the dissenting opinion for Smith v. United States, Justice McReynolds argued that the majority's decision to uphold a conviction based on circumstantial evidence was flawed. He contended that there was not enough substantial evidence to prove beyond reasonable doubt that Smith had committed perjury when he denied selling liquor illegally. The only proof presented by the prosecution were two empty bottles found in his home and testimonies from individuals who claimed they bought alcohol from him, which according to McReynolds did not conclusively establish guilt. Furthermore, he criticized the court's reliance on inference and presumption rather than direct factual evidence as dangerous precedent-setting behavior that could lead to wrongful convictions in future cases.