In the United States v. Brosnan et al., 1959, the Supreme Court examined whether certain payments made by a railroad company to its employees were taxable under federal income tax laws. The payments in question were made as part of an agreement between the company and its workers' union, compensating employees for relinquishing their seniority rights when they transferred to another division within the same company. The Internal Revenue Service (IRS) argued that these payments constituted taxable income while Brosnan and his fellow plaintiffs contended that they represented capital gains from selling property rights (seniority). In a split decision, with Justice Brennan writing for the majority, it was ruled that such compensation should be treated as ordinary income rather than capital gain because seniority does not constitute "property" in any traditional sense; hence cannot be sold or exchanged like other forms of property.

In the dissenting opinion for United States v. Brosnan et al., Justice Brennan, joined by Chief Justice Warren and Justices Black and Douglas, argued that the majority's interpretation of Section 112(b)(1) of the Internal Revenue Code was incorrect. They contended that Congress intended to tax all property received in exchange for a taxpayer's relinquishment of rights under an employer’s stock option plan as ordinary income at its fair market value when received. The dissenters believed this should apply regardless if it is transferred subject to conditions or restrictions which may later diminish or extinguish its value. They also disagreed with the majority's view on how taxpayers' intent affects their tax liability, arguing that such subjective considerations are irrelevant in determining whether a taxable event has occurred under federal law.