In the case of Webre Steib Co., Ltd. v. Commissioner of Internal Revenue (1944), the U.S Supreme Court was tasked with determining whether a corporation could deduct from its gross income, for federal tax purposes, amounts paid to its stockholders as dividends out of earnings and profits accumulated during taxable years when it had been exempt from federal income taxes due to being an affiliate of a foreign trade corporation. The court held that such payments were not deductible in computing net income subject to taxation under Section 115(a) and (b) of the Revenue Act 1936 because they represented distributions made out of earnings or profits which had been previously taxed or were then currently taxable. This decision upheld previous rulings by lower courts that these dividend payments did not constitute allowable deductions for corporate taxpayers.

The dissenting opinion in the case of Webre Steib Co., Ltd. v. Commissioner of Internal Revenue argued that the majority's decision was inconsistent with previous rulings and misinterpreted the tax code. The dissent believed that a corporation should not be taxed on income derived from its own property, as this would constitute double taxation - once when it earns income and again when it distributes dividends to shareholders. They also disagreed with how the majority interpreted "earnings" under section 115(j) of the Revenue Act, arguing that earnings should include all profits made by a company during a given period, regardless if they are distributed or retained for future use within business operations.