In the United States v. Payne case in 1923, the Supreme Court ruled on a matter concerning federal income tax law. The defendant, Mr. Payne, had received an inheritance from his deceased mother's estate and argued that this should not be considered taxable income under the Revenue Act of 1916 because it was a transfer of property at death rather than earned income or profit from labor or investment. However, the court disagreed with Payne's interpretation of what constituted "income". It held that while direct inheritances were not taxable as they fell under estate taxes instead, any increase in value (or appreciation) between when an individual inherited property and when they sold it could indeed be taxed as income. This decision clarified how capital gains derived from inheritances would henceforth be treated for taxation purposes.

In the dissenting opinion for United States v. Payne, Justice McReynolds disagreed with the majority's decision to uphold a conviction based on evidence obtained through wiretapping. He argued that this violated the Fourth Amendment rights of citizens against unreasonable searches and seizures. According to him, allowing such practices would set a dangerous precedent where privacy could be easily invaded by law enforcement agencies without any legal consequences or checks in place. He believed that it was essential to protect individual liberties even at the cost of potentially letting some criminals go free, as upholding constitutional principles should take precedence over achieving short-term gains in crime control efforts.