Playing the Economic Substance Trump Card: Black & Decker v. United States

16 Pages Posted: 3 Jan 2008

See all articles by Stephen Charles Lessard

Stephen Charles Lessard

Orrick, Herrington & Sutcliffe, LLP; New York County Lawyers' Association (NYCLA); American Bar Association - Section of Taxation

Abstract

This paper examines the application of the economic substance doctrine in determining whether a business transaction is a sham and argues that the court in Black & Decker v. United States incorrectly applied the economic substance doctrine before it expressly resolved issues requiring statutory interpretation. Part I of the paper discusses the historical development of the economic substance doctrine and its recent embodiment in case law. Part II sets forth the facts of the subject case and the district court's opinion. Part III argues that the district court incorrectly analyzed the issue, applying the economic substance doctrine prematurely. The Black & Decker case is contrasted with Coltec Industries, Inc. v. United States, a similar decision that rejected application of the economic substance doctrine in favor of formal statutory interpretation. The paper concludes with a discussion of some of the ramifications of the Black & Decker decision for the future of the economic substance doctrine.

Keywords: economic substance doctrine, taxation, income tax, corporate tax, tax shelter

JEL Classification: H20, H25, H26, K34

Suggested Citation

Lessard, Stephen Charles, Playing the Economic Substance Trump Card: Black & Decker v. United States. Tax Lawyer, Vol. 58, No. 4, 2005, Available at SSRN: https://ssrn.com/abstract=1080291

Stephen Charles Lessard (Contact Author)

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