In the United States v. Magnolia Petroleum Company case in 1927, the Supreme Court ruled on a dispute involving oil and gas leases on Osage Indian lands in Oklahoma. The issue was whether or not these leases were subject to state taxation. The U.S government argued that as trustee of the land for the benefit of the Osage Indians, it should be exempt from such taxes under federal law. However, Magnolia Petroleum Company contended that since they held an economic interest in these properties through their lease agreements with individual tribal members, they should be considered private property and thus taxable by state authorities. The court sided with Magnolia Petroleum Company stating that while Congress had indeed granted certain tax exemptions to Indian tribes and their lands, this did not extend to third-party lessees like Magnolia who derived profits from those lands independent of any direct benefits conferred upon tribes themselves. Therefore, despite being located within reservation boundaries and originally owned by Native Americans under federal trusteeship; once leased out privately - these parcels became liable for local taxation just like any other commercial enterprise operating within state jurisdiction.

In the dissenting opinion for United States v. Magnolia Petroleum Company, Justice Holmes disagreed with the majority's interpretation of a contract between the U.S. government and an oil company regarding royalties from oil production on Native American lands. He argued that while it was true that Congress had authorized such contracts to be made in order to protect Native Americans' interests, this did not mean every term within them should automatically favor these tribes at any cost. Instead, he believed each contract should be interpreted based on its specific language and context rather than assuming a one-sided intent by Congress in all cases involving tribal lands or resources. In this case, he felt there was no clear indication that Congress intended for royalty payments to increase if market prices rose above a certain level as claimed by the government; therefore, he would have ruled in favor of Magnolia Petroleum instead.