In the United States v. Powell et al., Receivers, 1946 case, the Supreme Court ruled on a dispute involving federal income tax liability. The Internal Revenue Service (IRS) had assessed additional taxes against a bankrupt corporation and its shareholders for fiscal years prior to bankruptcy proceedings. The receivers of the bankrupt corporation argued that they were not liable for these additional assessments as they were made after bankruptcy proceedings began and thus should be considered post-bankruptcy debt which is typically discharged in such cases. However, the IRS contended that it was merely correcting an under-assessment of pre-bankruptcy tax liabilities. The Supreme Court sided with the IRS, ruling that while generally claims arising after commencement of reorganization are not allowable against debtor's estate or its receiver unless approved by court order; this rule does not apply when claim arises from correction of previous under-assessments relating to period before reorganization commenced - even if assessment itself occurs afterwards. Therefore, according to this decision, corrections made by IRS regarding past tax liabilities can still be collected from a bankrupt entity despite ongoing bankruptcy procedures.

In the dissenting opinion for United States v. Powell et al., Receivers, Justice Frankfurter disagreed with the majority's decision to allow a taxpayer to be subjected to an investigation by the Internal Revenue Service (IRS) without any specific reason or suspicion of wrongdoing. He argued that this was a violation of due process rights and could lead to abuse of power by government agencies. Furthermore, he believed that such investigations should only be allowed if there is reasonable cause or evidence suggesting tax evasion or fraud has occurred. The justice also expressed concern about potential invasions of privacy and harassment from unwarranted IRS inquiries into personal financial matters. His view was that taxpayers should not have their lives disrupted by intrusive investigations unless there are clear indications they may have violated tax laws.