Perspective
Oct. 22, 2010
Economic Substance Doctrine: The IRS' Newly Fortified Weapon
The newly codified economic substance doctrine may change the way tax and business planners do business. By Bruce Givner and Owen Kaye of Givner & Kaye.
The Internal Revenue Service has always had non-statutory doctrines available to combat transactions it does not like. The "substance over form" doctrine is used to disallow tax benefits from transactions whose form differs from its substance. Assume a shareholder capitalizes a corporation with $1,000 and loans it $100,000. The large debt is to permit the corporation to deduct the interest. The IRS might seek to dis...
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