In the United States v. Gilbert Associates, Inc., 1952 case, the Supreme Court examined whether a taxpayer could deduct from gross income amounts paid to its employees as part of a profit-sharing plan. The company had established this plan in 1943 and made payments into it for several years without claiming any deductions on their federal tax returns. However, in 1946 they sought to claim these contributions as business expenses under section 23(a)(1)(A) of the Internal Revenue Code. The IRS denied this deduction and assessed additional taxes against them. The Supreme Court ruled that such contributions were not deductible because they did not constitute ordinary and necessary business expenses under section 23(a)(1)(A). This was due to two reasons: firstly, there was no definite commitment by the corporation each year to make payments; secondly, even if there were such an obligation, it would be contingent upon profits being earned which is speculative in nature thus cannot be considered an 'ordinary' expense.

The dissenting opinion in the United States v. Gilbert Associates, Inc., case argued that the majority's decision to allow a deduction for payments made by Gilbert Associates under its profit-sharing plan was incorrect. The dissent contended that these payments were not ordinary and necessary business expenses as defined by Section 23(a) of the Internal Revenue Code but rather distributions of profits to shareholders. They believed this interpretation would lead to an inequitable result where corporations could deduct their entire net income as a "business expense," thereby avoiding any tax liability. Furthermore, they pointed out inconsistencies with previous rulings on similar issues and expressed concern about setting a precedent that could be exploited for tax avoidance purposes.