In the case of Strother v. Burnet, Commissioner of Internal Revenue in 1932, the U.S Supreme Court ruled on a tax dispute involving stock dividends. The plaintiff, Strother, had received dividends from his company's stocks and argued that these should not be taxed as income since they were derived from surplus profits accumulated before the enactment of relevant tax laws. However, the court disagreed with this argument and held that such dividends are taxable regardless of when the profits were earned by a corporation. This decision was based on an interpretation of Section 201(g) and (h) of Revenue Act 1921 which stated that all stock dividends shall be included in gross income for taxation purposes unless otherwise specified by law.

In the dissenting opinion for Strother v. Burnet, it was argued that the majority's decision to tax Mr. Strother on his income from a partnership agreement after he had left the firm was incorrect. The dissenting justices believed that once Mr. Strother had withdrawn from the partnership and received payment for his share of its capital assets, he should not have been considered as still participating in or profiting from its business operations. They contended that any profits made by the firm after his departure were due to efforts of remaining partners and not attributable to him; thus, they shouldn't be taxed as part of his personal income under federal law at all.