In the case of Zimmern et al. v. United States in 1935, the U.S Supreme Court ruled on a matter concerning federal income tax law and its application to foreign corporations operating within the United States. The appellants, who were shareholders in a Cuban sugar corporation that operated both in Cuba and Louisiana, argued against being taxed for dividends they received from their shares under Section 217(a) of Revenue Act of 1921 which imposed taxes on non-resident alien individuals or foreign corporations not engaged in trade or business within the US during taxable year. However, it was determined by lower courts that these dividends were indeed subject to taxation as they derived from profits made through operations conducted within U.S borders - an interpretation upheld by the Supreme Court upon appeal. Therefore, this case affirmed that foreign entities conducting substantial business activities inside American territory are liable for federal income tax obligations.

In the dissenting opinion for Zimmern et al. v. United States, Justice Stone argued that the majority's decision to uphold a tax on dividends paid by foreign corporations to American shareholders was inconsistent with previous rulings and principles of international law. He contended that such taxation constituted an extraterritorial application of U.S laws which is generally disallowed under international norms unless explicitly authorized by Congress - something he believed had not occurred in this case. Furthermore, Justice Stone expressed concern about potential double taxation issues arising from taxing income earned abroad and suggested it could lead to negative economic consequences for American businesses operating overseas as well as harm diplomatic relations with other nations who might retaliate against perceived overreach by the U.S government.