In the case of David A. Gitlitz et ux., et al. v. Commissioner of Internal Revenue, 2000, the U.S Supreme Court ruled in favor of taxpayers who were shareholders in an insolvent S corporation (a type of corporation that is not subject to federal income tax). The issue at hand was whether discharged debt could be considered as taxable income and if it increased a shareholder's basis in their stock - which would allow them to claim losses on their personal tax returns. The court held that discharge-of-indebtedness (DOI) income should pass through to shareholders and increase their bases before any reduction for losses occurs due to insolvency or bankruptcy exceptions under Section 108(a) of the Internal Revenue Code. This ruling allowed these taxpayers to deduct corporate losses from other individual gains on their personal taxes.

In the dissenting opinion for Gitlitz v. Commissioner of Internal Revenue, Justice Ginsburg argued that allowing insolvent taxpayers to exclude discharge of indebtedness (DOI) income from gross income while still increasing their tax attributes by the amount of DOI would result in a "double windfall" for these taxpayers. She contended that this interpretation was contrary to Congress's intent when it enacted the Bankruptcy Tax Act of 1980 and revised provisions related to DOI income. According to her, Congress intended for insolvent taxpayers outside bankruptcy proceedings and those within such proceedings be treated similarly with respect to taxation on forgiven debt. The majority’s ruling allowed an unequal treatment where non-bankrupt but insolvent individuals could gain significant tax benefits not available under bankruptcy law - something she believed Congress did not intend.