In the case of Mahon, Trustee in Bankruptcy, et al. v. Stowers et al., 1973, the U.S Supreme Court was asked to determine whether a bankruptcy trustee could set aside as fraudulent a transfer of property made by an insolvent debtor for less than reasonably equivalent value when such transfer had been made within one year prior to filing for bankruptcy. The court held that under Section 67(d)(2) (a) and (d) of the Bankruptcy Act, if a debtor makes a transfer with actual intent to hinder or delay creditors and receives less than reasonably equivalent value in return while he is insolvent or becomes insolvent as result thereof; then such transaction can be deemed fraudulent regardless of whether it occurred within one year before filing for bankruptcy or not. This ruling clarified that insolvency at time of transaction coupled with lack of fair consideration are key factors in determining fraudulence rather than just timing alone.

In the dissenting opinion for Mahon, Trustee in Bankruptcy, et al. v. Stowers et al., Justice Douglas argued that the majority's decision was a departure from precedent and an unwarranted expansion of bankruptcy law. He contended that under existing law, only actual fraud could justify setting aside a transfer as fraudulent; however, the majority had ruled based on "constructive" fraud without any evidence of intent to defraud creditors or conceal assets. Furthermore, he criticized their reliance on state laws regarding fraudulent transfers which were not applicable in federal bankruptcy proceedings. He also disagreed with their interpretation of 'fair consideration,' arguing it should be determined by market value at time of transaction rather than subjective judgment about fairness after-the-fact.