In the case of Taft v. Bowers, 1928, the U.S Supreme Court was tasked with determining whether a taxpayer could claim a deduction for losses incurred from sales of stock in corporations that were later liquidated. The petitioner, Charles P. Taft II (son of President William Howard Taft), had sold shares at a loss and then claimed these losses as deductions on his income tax return under Section 214(a)(5) of the Revenue Act of 1918 which allowed for such deductions if they were "incurred in any transaction entered into for profit." However, this was denied by Fred C. Bowers who served as Collector Of Internal Revenue. The court ruled against Mr.Taft stating that he did not qualify to make such claims because he had not engaged in these transactions solely for profit but rather out of an obligation to protect his other investments and personal interests within those corporations; thus it wasn't purely an investment activity aimed at making profits but also involved elements related to management control over said companies. This decision established precedent regarding how courts interpret 'transactions entered into for profit' when considering deductibility provisions under tax law.

In the dissenting opinion for Taft v. Bowers, Justice Holmes argued that the majority's decision was based on a misinterpretation of tax law and its application to gifts inter vivos (gifts made during one's lifetime). He contended that such gifts should not be subject to income tax because they do not represent an increase in wealth or capital for the recipient but are merely a transfer of existing assets. Furthermore, he disagreed with the majority's view that Congress intended to include these types of transfers within taxable income when it passed relevant legislation. According to Holmes, this interpretation contradicted both common sense and legal precedent regarding taxation principles.