In the 1926 case of Wachovia Bank & Trust Company, Administrator, et al. v. Doughton, Commissioner of Revenue, the U.S Supreme Court ruled that a state cannot tax intangible property held by a resident trustee for non-resident beneficiaries. The case involved North Carolina's attempt to impose an inheritance tax on trust income derived from securities physically located in New York but managed by a North Carolina-based administrator (Wachovia). The court found this taxation unconstitutional as it violated due process rights under the Fourteenth Amendment because the beneficiaries were not residents of North Carolina and had no control over or benefit from these assets while they remained in trust. This decision reinforced that states could only levy taxes on properties within their jurisdictional boundaries.

In the dissenting opinion for Wachovia Bank & Trust Company v. Doughton, Justice Holmes argued that North Carolina had the right to tax income from intangible property held outside of its jurisdiction. He contended that while a state cannot tax property situated beyond its borders, it can impose taxes on incomes derived from such properties if they are owned by residents within their jurisdiction. The majority's decision was based on the premise that taxation rights were tied to physical location; however, Holmes believed this view was outdated and failed to consider modern economic realities where wealth could be generated across state lines through intangible assets like stocks and bonds. He maintained that states should have the power to levy taxes on all sources of income enjoyed by their residents regardless of where these sources were located.