In the case of United States v. Basye et al., 1972, the Supreme Court ruled on a tax dispute involving medical care reimbursements. The respondents were members of a non-profit mutual benefit association that provided prepaid medical services to its subscribers through contracted physicians who agreed to provide all necessary professional services in return for periodic payments based on their number of patients. The issue was whether these payments constituted "amounts received…through accident or health insurance" under Section 105 (e) (3) and hence were excludable from gross income under Section 105(d). The court held that they did not qualify as such because they represented compensation for personal services rendered rather than reimbursement for loss due to illness or injury. Therefore, these amounts could not be excluded from gross income.

In the dissenting opinion for United States v. Basye et al., Justice Douglas argued that the majority's interpretation of Section 162(a) of the Internal Revenue Code was incorrect. He contended that this section should not be interpreted to allow taxpayers to deduct expenses incurred in earning income exempt from tax under another provision (Section 107). According to him, allowing such deductions would result in a double benefit for taxpayers and undermine Congress' intent when it enacted Section 265, which prohibits deductions related to tax-exempt income. Furthermore, he expressed concern about potential abuse if individuals could create their own "tax shelters" by forming corporations or partnerships solely for the purpose of generating deductible expenses associated with tax-exempt income. In his view, this case represented an instance where a taxpayer sought unjust enrichment at public expense through manipulation of complex provisions within taxation law.