In the case of William McCoach, Collector, etc., Petitioner v. The Philadelphia Trust, Safe Deposit and Insurance Company et al., Executors in 1906, the U.S Supreme Court was asked to determine whether a federal estate tax could be levied on property that had been transferred prior to death but with retained life interest by the deceased. The decedent had transferred ownership of certain properties into trusts while retaining income from those assets for his lifetime. Upon his death, these assets were not included in calculating his taxable estate under Pennsylvania law because he no longer held legal title at time of death; however, they were included by federal authorities who argued that since he continued to receive benefits from them during his lifetime they should be considered part of his gross estate for taxation purposes. In its decision favoring McCoach (the collector), the court ruled that such transfers are indeed subject to federal taxation as long as there is retained life interest or control over disposition after death by the transferor.

In the dissenting opinion for the case of William McCoach, Collector, etc., Petitioner v. The Philadelphia Trust, Safe Deposit and Insurance Company et al., Executors (1906), Justice Harlan argued that a tax on an inheritance was not a direct tax but rather an excise or duty. He believed that it should be considered as such because it is imposed upon the privilege of receiving property by will or descent after death. Therefore, he disagreed with the majority's ruling that this type of taxation required apportionment among states according to their population as mandated by Article I Section 2 Clause 3 and Article I Section 9 Clause 4 of U.S Constitution for all direct taxes. Instead, he maintained that these clauses did not apply to estate taxes since they were indirect in nature.