In the United States v. Rose case of 1976, the Supreme Court ruled on a tax dispute involving three professional baseball players who had sold their future earnings rights to an investment company in exchange for immediate lump sum payments. The Internal Revenue Service (IRS) argued that these payments should be taxed as ordinary income, while the players contended they should be considered capital gains and thus subject to lower tax rates. The court sided with the IRS, ruling that such transactions were indeed taxable as ordinary income under Section 61(a) of the Internal Revenue Code because it represented compensation for services rendered by them during their playing careers rather than a sale or exchange of property rights. This decision set a precedent regarding taxation rules for athletes selling future earnings rights.

In the dissenting opinion for United States v. Rose, Justice William J. Brennan Jr., joined by Justices Thurgood Marshall and Potter Stewart, argued that the majority's interpretation of Section 117(a) was incorrect and overly broad. They contended that Congress intended to exempt from taxation only those scholarships which are used exclusively for tuition and related expenses, not those given as stipends for living expenses or other non-educational purposes. The dissenters believed this distinction is crucial because it aligns with a fundamental principle of tax law: income derived from any source is taxable unless specifically excluded by statute. Therefore, they asserted that scholarship funds used for room and board should be considered taxable income under the Internal Revenue Code.