In the case of United States v. Midland-Ross Corp., the Supreme Court addressed whether a taxpayer could deduct from its gross income, for federal tax purposes, amounts paid to redeem its debentures (a type of debt instrument not secured by physical assets or collateral). The company had issued these debentures in connection with a previous reorganization and claimed that payments made towards them should be considered as ordinary business expenses. However, the Internal Revenue Service disagreed and argued that such payments were essentially capital expenditures which are non-deductible under U.S tax law. The Supreme Court sided with the IRS ruling that redemption of debentures was indeed a capital expenditure rather than an ordinary business expense because it resulted in a significant long-term benefit for Midland-Ross Corp., namely reducing their outstanding debts. Therefore, they ruled these costs couldn't be deducted from gross income when calculating taxable profits.

In the dissenting opinion for United States v. Midland-Ross Corp., Justice Harlan argued that the majority's interpretation of Section 3443(a)(1) of the Internal Revenue Code was incorrect. He believed that this section should not be read as imposing a tax on every single payment made under an installment contract, but rather only on those payments which were actually received during the taxable year in question. According to him, such an interpretation would align more closely with both Congressional intent and established principles of taxation law, which generally seek to impose taxes based on actual income or gain realized by a taxpayer within a given period. Furthermore, he contended that even if one were to accept the majority's broader reading of Section 3443(a)(1), it still wouldn't justify their decision to uphold Midland-Ross' liability for additional taxes because there was no evidence showing they had actually received any extra income from their installment contracts during the years at issue.