Economic Substance and the Supreme Court

28 Pages Posted: 12 Sep 2007 Last revised: 26 Jan 2015

See all articles by Andy Grewal

Andy Grewal

University of Iowa - College of Law


The Supreme Court grants certiorari in a wide variety of fascinating cases. Occasionally, it agrees to decide tax cases, too.

Perhaps because of the perceived dryness of tax law, the Court has been hesitant to address the validity of the so-called economic substance doctrine. Although there are too many formulations of the doctrine to count, the lower courts often hold that even when a taxpayer has met a statute's requirements, he cannot enjoy any of its benefits unless his conduct reveals a business purpose and a reasonable expectation of profit.

This article argues that the lower courts' application of an extrastatutory economic substance doctrine cannot be reconciled with the Supreme Court cases that purportedly gave birth to that doctrine.

Keywords: intentionalism, supreme court, economic substance doctrine, tax shelters, tax, statutory interpretation, purposivism, textualism, Coltec, Gregory, Knetsch, economic substance, sham transaction doctrine, substance over form doctrine, business purpose doctrine, LILO, Son of Boss

Suggested Citation

Grewal, Amandeep S., Economic Substance and the Supreme Court. Tax Notes, Vol. 116, No. 11, 2007, Available at SSRN:

Amandeep S. Grewal (Contact Author)

University of Iowa - College of Law ( email )

Melrose and Byington
Iowa City, IA 52242
United States

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