Download or read book The Economic Substance Doctrine written by William W. Chip and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax Management Portfolio No. 508-2nd, The Economic Substance Doctrine, analyzes the “economic substance doctrine” as codified in §7701(o) of the Internal Revenue Code. Section 7701(o) defines the “economic substance doctrine” as the “common law” developed by the courts to disallow tax benefits for tax-motivated transactions that had no “business purpose” or no “economic substance.” The “business purpose” test looks to the taxpayer's motives for entering into the transaction, while the “economic substance” test looks to the reality of the transaction. Prior to codification, the presence of either “business purpose” or “economic substance” was sufficient in some circuits to sustain a transaction's tax benefits (the “disjunctive” test); in other circuits both needed to be present (the “conjunctive test”). Section 7701(o) codified the “conjunctive” test by disallowing the federal tax benefits of any transaction for which the courts have found either “business purpose” or “economic substance” to be “relevant” unless, apart from federal tax benefits, there is both a “substantial purpose” for entering into the transaction and a “meaningful change” in the taxpayer's “economic position.” Section 7701(o) also clarifies how the “profit potential” of a transaction may be used to demonstrate economic substance. Of even greater importance to post-codification tax planning is the 20% penalty on §7701(o) adjustments that is imposed by §6662(a) of the Internal Revenue Code (increased to 40% if the transaction is not “adequately disclosed” on the return). The penalty applies without regard to whether the taxpayer had a professional advisor's tax opinion or any other “reasonable basis” for believing the transaction at issue had economic substance. Chapter I of the Portfolio summarizes the codified doctrine, including the strict-liability penalties that attach to economic substance adjustments and important guidance in the legislative history concerning when the doctrine is “relevant” to allowance of tax benefits from a tax-motivated transaction. Chapter II analyzes a series of court decisions that are regarded as landmarks in the development of the business purpose and economic substance doctrines. Chapter III analyzes other judicial doctrines, such as the step-transaction doctrine, that overlap or may supply insight into how the codified economic substance will be applied. Chapter IV distinguishes the conjunctive and disjunctive tests and analyzes the pre-codification circuit split concerning with test to apply. Chapter V discusses the pre-codification “profit potential” authorities. Chapters VI through VIII provide a comprehensive case-by-case survey of pre-codification case law, sorted by topic. This Portfolio may be cited as Chip, 508-2nd T.M., The Economic Substance Doctrine.

Download or read book When and How Should the Economic Substance Doctrine Be Applied written by David P. Hariton and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this essay, I argue that the economic substance doctrine should be applied solely to disallow tax benefits arising from tax shelters. I define a tax shelter as a transaction that generates net losses, deductions or credits that serve to eliminate the tax that would otherwise be imposed on unrelated income. I explain why I think it is problematic for a court to apply the doctrine by recharacterizing transaction steps, rather than by simply disallowing tax benefits. I also explain why I think it problematic for a court to apply the doctrine based on vague reasoning or broad criteria that also encompass routine business transactions (i.e., to allow bad facts to make bad law). In general, I assert that a court must first "frame" the relevant transaction and consider the transaction as a whole, rather than focus on any particular structure or step. It must next determine how much unique economic risk the taxpayer incurs by entering into the transaction. It must next determine what are the tax benefits purportedly arising from the transaction. It must next consider the former in relation to the latter in order to determine whether the transaction as a whole "lacks economic substance." If it does, then the court must next consider whether the relevant tax benefits violate Congressional intent. If, but only if, they do, then it should disallow those benefits under the economic substance doctrine.

Download or read book The Economic Substance Doctrine written by and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The economic substance doctrine is a judicially developed doctrine that has become one of the IRS's primary tools in fighting abusive tax shelters. The doctrine permits transactions lacking in economic substance to be disregarded for tax purposes. In 2006, four significant decisions dealing with the doctrine were issued by U.S. courts of appeals. In the 110th Congress, S. 96 (Export Products Not Jobs Act) has been introduced to codify the doctrine. This report discusses the doctrine's development and the four cases and summarizes the bill. It will be updated as events warrant.

Download or read book Codification of the Economic Substance Doctrine written by Rebecca Rosenberg and published by . This book was released on 2019 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: Section 7701(o) of the Internal Revenue Code incorporates the controversial judicial doctrine of economic substance into statutory language. In other words, it “codifies” the doctrine. (The economic substance doctrine generally provides that a tax benefit that goes beyond Congressional intent can be disallowed by the courts, even if the taxpayer meets all of the literal Code and regulatory requirements for claiming the benefit).This codification appears to have accidentally dissuaded the relevant agency (the Internal Revenue Service, or IRS) from raising economic substance issues -- an effect that is contrary to Congress' intent in enacting the doctrine into legislation. The IRS response to codification raises bigger picture issues, such as an agency's ability to disregard (or decline to enforce) a statute and the parameters of an agency's ability to issue public guidance using informal means (rather than formal regulations).In addition, this codification raises structural issues, including the interaction between the three branches of government in this context and the impact of Congressional approval on arguments about the validity of this judicial doctrine. Lastly, such codification places new emphasis on distinguishing between the now-codified economic substance doctrine and other anti-abuse doctrines.

Download or read book Codification of the Economic Substance Doctrine written by Rebecca Rosenberg and published by . This book was released on 2018 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Section 7701(o) of the In ...

Download or read book Codification of the Economic Substance Doctrine written by Xinlei Liu and published by . This book was released on 2003 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Save the Economic Substance Doctrine from Congress written by Dennis J. Ventry and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the last several years, federal courts have invalidated abusive transactions by relying heavily on the judicially created economic substance doctrine. These court decisions not only reinforce the vitality of the doctrine, but also reaffirm the principle that literal compliance with statutory tax provisions is simply not enough to secure tax benefits. Despite the impressive anti-shelter effectiveness of the economic substance doctrine, Congress is preparing to straitjacket the doctrine by codifying it under the Internal Revenue Code. Codification is a terrible idea. Reducing the doctrine to an inelastic administrative rule would sap its power and lead to more rather than less abuse by providing clever tax planners an opportunity to occupy and manipulate the statutory line between permissible and impermissible behavior. The power of the doctrine lies in its ability to adapt to new and unforeseen tax planning strategies. Malleable standards are particularly important in tax law, where the law itself can be ambiguous and where application of fact to law contains numerous outcomes, such that determining the right answer is an inherently uncertain proposition. A rigid rule would provide opportunity rather than certainty, and it would foster overaggressive tax planning. The economic substance doctrine regularly acts as the last line of defense against abusive tax avoidance, and its facts and circumstances analysis is better left in the hands of judges than legislative drafters.

Download or read book The Economic Substance Doctrine written by Yoram Keinan and published by . This book was released on 2006-01-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "... analyzes the economic substance doctrine and associated judicial anti-abuse doctrines. The courts over the years have developed these doctrines to prevent tax results that literally satisfy one or more sections of the Internal Revenue Code but nevertheless appear "too good to be true." Although often separately identified and articulated, these interrelated doctrines must be considered together rather than in isolation. "

Download or read book The Economic Substance Doctrine written by Carol A. Pettit and published by . This book was released on 2008 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Economic Substance Doctrine written by Amir Pichhadze and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: As a general rule, an effective strategy for combating tax avoidance within an income tax system is to require that market transactions have an economic substance. The administration of this principle, however, has given rise to constitutional and institutional dilemmas in the U.S., the U.K., and Canada. During the 20th century, judges in these countries have sought to intervene (to various degrees and at different stages) in the battle against tax avoidance by contributing to the application and development of the economic substance doctrine, but this judicial activism has created concerns about the intervention of the judiciary in deciding what types of transactions should require economic substance - a role that institutionally belongs to the legislature. In this article, we identify an important shift in judicial attitude during the early part of the 21st century in Canada, the U.K., and the U.S., and the implications of this shift to future reforms in this area. We note that when the government fails to state its policy objectives, the judiciaries in these jurisdictions demonstrate reluctance and/or difficulty in filling in the gaps by making decisions about when transactions should require economic substance, and instead are leaving it to the legislatures to indicate when and if this requirement applies. The implication of this observation vis-¿-vis new and emerging judicial attitudes is significant given that it puts new pressures on the legislature: If the legislature is no longer able to rely on the courts to make these decisions to effectively administer the doctrine, the legislature will have to require the doctrine by statute. That is, the legislature will have to transform the doctrine into a generally applicable anti-avoidance rule and express it in a clear and unambiguous manner.

Download or read book The Economic Substance Doctrine Past Present and Future written by Yoram Keinan and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, the econ ...

Download or read book Will the Economic Substance Doctrine Get Lost in the Woods Amicus Brief written by Andy Grewal and published by . This book was released on 2014 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This fall, the Supreme Court will hear oral arguments in U.S. v. Woods, a tax case involving complex jurisdictional and penalty issues that no emotionally healthy person should take an interest in. But behind those issues lie important questions about the economic substance doctrine, which involves the allocation of lawmaking authority between the legislature and the judiciary.This amicus brief, submitted in support of neither party, informs the Court about the issues hiding in this case. It urges the Court to take a cautious approach in deciding Woods -- the phrase "economic substance doctrine" has never appeared in a Court opinion, so the tax bar and government attorneys will pay close attention to anything the Court says here. And although Congress partially codified the economic substance doctrine in Section 7701(o), that statute expressly leaves it to the courts to determine when the doctrine is "relevant." Woods could very well provide guidance on that fundamental question, and the brief makes the Court aware of the critical issues.Although this brief is directed to the Justices, anyone interested in how Woods might affect the economic substance doctrine may find it useful. Also, the brief suggests a potential due process challenge to the new statutory economic substance penalty, which may interest practitioners.

Download or read book The Case Against a Strict Liability Economic Substance Penalty written by Kathleen DeLaney Thomas and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The latest wave in tax shelter reform is the recent codification of the so-called “economic substance doctrine” and the accompanying strict liability penalty for violations of the doctrine. The new strict liability penalty has been criticized by tax scholars and practitioners for being unfair and disproportionate. However, most commentators have not evaluated whether there is any need for a separate penalty for violations of the economic substance doctrine at all, strict liability or otherwise. The first part of this Article considers the new economic substance penalty in light of the current penalties applicable to tax shelters and argues that a separate penalty provision for violations of the economic substance doctrine should not have been enacted. This Article will demonstrate that the current accuracy-related penalty regime is sufficient to address transactions that violate the economic substance doctrine and that the new penalty adds significant and undue complexity to the current regime. This Article will then explore the strict liability aspect of the penalty and consider whether there is any justification for carving out transactions that violate the economic substance doctrine as especially deserving of strict liability as compared to other tax shelter transactions. Congress's justifications for the new strict liability penalty largely focus on taxpayer deterrence and reducing disadvantages to the IRS in enforcing penalties. However, Congress has failed to articulate why violations of the economic substance doctrine have been singled out for strict liability when other tax shelter penalties contain taxpayer defenses. The only way to properly justify a new tax shelter penalty with strict liability would be to tie that penalty to the most egregious forms of taxpayer misconduct, but there appears to be no link between violations of economic substance and the worst kinds of tax shelters. Given that violations of the economic substance doctrine are not a proxy for the most abusive tax shelter transactions, this Article concludes that the imposition of a strict liability penalty cannot be reconciled with other tax shelter penalties that provide for various forms of a reasonable cause defense.

Download or read book Stars Wars written by Rebecca Rosenberg and published by . This book was released on 2018 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent, controversial STARS (Structured Trust Advantaged Repackaged Securities) cases provide a backdrop for analyzing how the economic substance doctrine ideally should be applied to foreign tax credit cases. The economic substance doctrine is a judicial doctrine that allows courts to disregard the tax consequences of a transaction that violates the intent of the relevant statute. Its application to foreign tax credits has a long and contentious history, and the STARS cases have given new life to the government's arguments. After the STARS cases, the circuits are split on the question of how foreign taxes should be treated in computing profit for purposes of the economic substance test. This article argues that foreign taxes should be treated as a cost for such purposes, even in situations in which the taxpayer does not bear the economic burden of the tax. Given the difficulties of applying the economic substance doctrine, the article also discusses possible alternative approaches (either under current law or as changes to the current statutory or regulatory rules). Among such alternatives, the article considers the viability of a subsidy argument in the STARS fact patterns (and in other future cases), although the government chose not to raise this argument in the STARS cases.

Download or read book Tax Planning with Substance a Multi area Survey of the Economic Substance Doctrine written by and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book United States Code written by United States and published by . This book was released on 2013 with total page 1506 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The United States Code is the official codification of the general and permanent laws of the United States of America. The Code was first published in 1926, and a new edition of the code has been published every six years since 1934. The 2012 edition of the Code incorporates laws enacted through the One Hundred Twelfth Congress, Second Session, the last of which was signed by the President on January 15, 2013. It does not include laws of the One Hundred Thirteenth Congress, First Session, enacted between January 2, 2013, the date it convened, and January 15, 2013. By statutory authority this edition may be cited "U.S.C. 2012 ed." As adopted in 1926, the Code established prima facie the general and permanent laws of the United States. The underlying statutes reprinted in the Code remained in effect and controlled over the Code in case of any discrepancy. In 1947, Congress began enacting individual titles of the Code into positive law. When a title is enacted into positive law, the underlying statutes are repealed and the title then becomes legal evidence of the law. Currently, 26 of the 51 titles in the Code have been so enacted. These are identified in the table of titles near the beginning of each volume. The Law Revision Counsel of the House of Representatives continues to prepare legislation pursuant to 2 U.S.C. 285b to enact the remainder of the Code, on a title-by-title basis, into positive law. The 2012 edition of the Code was prepared and published under the supervision of Ralph V. Seep, Law Revision Counsel. Grateful acknowledgment is made of the contributions by all who helped in this work, particularly the staffs of the Office of the Law Revision Counsel and the Government Printing Office"--Preface.

Download or read book Chemoil written by Benjamin Alarie and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Chemoil tax dispute provides an opportunity to explore the relationship between the economic substance doctrine and unprofitable transactions that are rendered economically viable by tax credits. Chemoil raises a particularly interesting point of contention. Transactions that generate specific excise tax credits (which are designed to encourage otherwise unprofitable activities) may appear to run afoul of the economic substance doctrine, which considers whether transactions have independent economic significance setting aside the tax benefits derived from the transactions. Thus, there is a tension between the congressional intent to provide an incentive for otherwise unprofitable activities and the congressional intent behind the economic substance doctrine, which, by its nature, denies tax benefits that arise out of transactions with no economic effects apart from their federal tax implications. Moreover, if a taxpayer cannot avoid application of the economic substance doctrine to the relevant transactions, the dispute raises the further question of whether transactions whose profitability is derived solely from excise tax credits should still be considered as having economic substance because of the nature of how these tax credits operate to encourage otherwise economically unviable yet ostensibly congressionally endorsed activities.