In the United States v. Sullivan case of 1926, the Supreme Court ruled that income obtained through illegal activities is still subject to federal income tax and must be reported. The defendant, Sullivan, was a bootlegger during Prohibition who did not report his illegal earnings on his federal income tax return. He argued that reporting such earnings would essentially force him to incriminate himself in violation of the Fifth Amendment's protection against self-incrimination. However, the court rejected this argument stating that while he could have legally refused to answer specific questions on his return about where he got certain money (if answering truthfully would incriminate him), simply failing to file a return at all was an unlawful act separate from any other crimes he may have committed related to earning said money illegally.

In the dissenting opinion for United States v. Sullivan, Justice Oliver Wendell Holmes Jr. argued that the defendant's conviction should be upheld despite his failure to report illegal income on his tax return. He contended that while it is true that a person cannot be compelled to incriminate himself, this principle does not apply when an individual voluntarily chooses to engage in business activities subject to government regulation and taxation. In such cases, he believed individuals are obligated under law to provide accurate information about their income regardless of its source or legality. Furthermore, he suggested that if Congress intended for illegally obtained gains not to be taxed due its potential self-incriminating nature, they would have explicitly stated so in the legislation itself.