In the case of Snyder v. Commissioner of Internal Revenue, 1934, the U.S Supreme Court ruled on a tax dispute involving stock dividends. The petitioner, Mr. Snyder, had received stock dividends from his company in 1921 and reported them as income for that year but did not pay taxes on them due to an existing law exempting such dividends from taxation. However, when he sold these stocks in 1926 after the law was changed to include stock dividends as taxable income, he calculated his profit based only on their selling price without deducting their value at acquisition (as they were considered non-taxable). The IRS disagreed with this calculation method and demanded additional taxes based on its own assessment which included the value of these shares at receipt time into cost basis for calculating capital gains upon sale. The court sided with Mr. Snyder stating that since those shares were legally non-taxable when acquired by him in 1921; hence their original cost basis should be zero while computing any future profits or losses resulting from their sale post-1926 amendment making such dividend stocks taxable.

In the dissenting opinion for Snyder v. Commissioner of Internal Revenue, it was argued that the majority's interpretation of "income" under Section 22(a) of the Revenue Act was too broad and inconsistent with previous rulings. The dissenting justices believed that a taxpayer should not be taxed on an increase in value until they have realized this gain by selling or disposing of their property. They contended that unrealized appreciation does not constitute income because it is merely a potential, which may never be realized due to market fluctuations or other factors beyond the taxpayer's control. Therefore, taxing such increases as if they were actual income would result in unfair taxation based on hypothetical gains rather than real economic benefit received by the taxpayer.