In the case of United States v. Home Title Insurance Co., 1931, the U.S Supreme Court ruled on a dispute regarding tax liability. The Home Title Insurance Company had purchased bonds issued by New York City and received interest from these bonds. However, they did not include this income when calculating their federal taxes, arguing that it was exempt under Section 213(b) of the Revenue Act of 1926 which stated that interest upon state or local government obligations should be excluded from gross income calculations for taxation purposes. The IRS disagreed with this interpretation and assessed additional taxes against them accordingly. The Supreme Court sided with the IRS in a unanimous decision stating that while Congress could have made such an exemption explicit within its legislation if it so desired, no such provision existed in current law to exclude municipal bond interest from taxable income at a corporate level. Therefore, corporations were required to pay federal tax on all forms of income unless explicitly exempted by statute.

In the dissenting opinion for United States v. Home Title Insurance Co., Justice Stone argued that the majority's decision to allow a tax deduction for losses incurred by an insurance company was not in line with the intent of Congress when it enacted the relevant tax laws. He believed that such deductions should only be allowed if they were directly tied to income generation, which he did not believe was true in this case. Furthermore, he contended that allowing such deductions would open up potential avenues for abuse and manipulation of tax liabilities by corporations. In his view, any ambiguity about whether a particular loss is deductible should be resolved against deductibility unless there is clear evidence from Congress indicating otherwise.