In the United States v. Reynolds case of 1918, the Supreme Court ruled on issues related to taxation and property rights. The defendant, George Reynolds, was a Utah resident who had purchased land in Mexico through an intermediary company based in New Jersey. When he sold this land for profit, he did not report it as income on his federal tax return because he believed that U.S. law did not apply to transactions made outside of its borders. However, the Internal Revenue Service disagreed with him and demanded payment of back taxes plus penalties for non-disclosure. The Supreme Court sided with the IRS by ruling that all American citizens are required to pay taxes on their worldwide income regardless of where they live or where those earnings were generated from. This decision established a precedent which has since been codified into law under Section 61(a) of the Internal Revenue Code.

In the dissenting opinion for United States v. Reynolds, Justice Holmes argued that the majority's interpretation of the Espionage Act was too broad and could potentially infrive on First Amendment rights. He believed that speech should only be punished if it presented a "clear and present danger" to national security or public safety. In this case, he did not believe that Charles Schenck's distribution of anti-draft leaflets during World War I met this standard. Furthermore, Holmes contended that in times of war, there is an increased need for open debate about government policies rather than lessened protections for free speech. The justice also expressed concern over potential misuse of power by those in authority under such a broad interpretation of the law.