In the United States v. Regan case of 1913, the Supreme Court dealt with issues related to taxation and constitutional law. The defendant, John F. Regan, was a stockholder in a corporation who received dividends from it which he did not include in his annual income tax return on grounds that they were exempted under the Corporation Tax Law of 1909 as an indirect tax. The government disagreed and assessed him for additional taxes based on these dividends leading to this litigation. The court held that while direct taxes must be apportioned among states according to their population, income taxes are generally considered indirect and do not need such apportionment unless they fall within recognized exceptions (such as real estate or personal property). In this context, corporate dividends paid out of earnings or profits were deemed taxable income rather than capital for individual shareholders like Regan. Therefore, despite arguments about double taxation (since corporations also pay tax), Justice Oliver Wendell Holmes Jr., writing for the majority upheld that Congress had power under Sixteenth Amendment to levy non-apportioned direct taxes on incomes from whatever source derived including corporate dividends.

In the dissenting opinion for United States v. Regan, Justice Holmes disagreed with the majority's interpretation of a tax law that allowed corporations to deduct losses from sales or exchanges of property. He argued that this provision should apply only when there is an actual loss in value and not merely because a corporation sold its assets at less than their original cost. According to him, if a corporation purchased property at an inflated price during times of high inflation but later sold it at market value after prices had fallen, it did not suffer any real economic loss even though it received less money than what was originally paid for the asset. Therefore, he believed such transactions should not be considered as deductible losses under the tax law.