In the case of Kieselbach et ux. v. Commissioner of Internal Revenue (1942), the U.S Supreme Court was tasked with determining whether or not a taxpayer could deduct losses from their income tax return that resulted from selling property to satisfy a debt, where the value of said property had depreciated since its purchase. The court ruled in favor of the Commissioner, stating that such losses were indeed deductible under Section 23(e)(1) and (2) of the Revenue Act 1938 as they constituted "losses sustained during taxable year and not compensated for by insurance or otherwise". This ruling clarified how taxpayers should treat losses incurred through forced sales due to indebtedness on their tax returns.

In the dissenting opinion for Kieselbach et ux. v. Commissioner of Internal Revenue, it was argued that the majority's decision to tax a portion of Mr. Kieselbach’s income from his life insurance policy was incorrect and inconsistent with previous rulings by the Court on similar matters. The dissenting justices believed that this income should not be considered taxable because it represented a return on capital investment rather than profit or gain, which is typically subject to taxation under federal law. They also pointed out that taxing these funds would effectively reduce their value and potentially undermine the financial security they were intended to provide for Mr. Kieselbach in his retirement years.