Rationalizing Tax Law by Breaking the Addiction to Economic Substance

37 Pages Posted: 9 May 2011 Last revised: 2 Aug 2011

See all articles by Allen Madison

Allen Madison

University of South Dakota Law School

Date Written: May 5, 2011


This article presents a critique of the economic substance doctrine and suggests an alternative. The economic substance doctrine under certain circumstances overrides the technical provisions of the Internal Revenue Code. Congress recently incorporated into the Code a version similar to the court-developed doctrine. Whether authorized by the court or authorized by statute, however, the doctrine makes our tax laws vague, uncertain, and fallacious. Therefore, the doctrine should be abandoned. A more appropriate tool for curbing questionable tax planning is the use of statutory risk requirements. This article provides some suggestions for developing such requirements. The article concludes that statutory risk requirements would help break the tax system’s addiction to economic substance and restore long overdue rationality.

Suggested Citation

Madison, Allen, Rationalizing Tax Law by Breaking the Addiction to Economic Substance (May 5, 2011). Idaho Law Review, Vol. 47, p. 441, 2011. Available at SSRN: https://ssrn.com/abstract=1832182

Allen Madison (Contact Author)

University of South Dakota Law School ( email )

414 E. Clark Street
Vermillion, SD 57069
United States

HOME PAGE: http://www.usd.edu/faculty-and-staff/Allen-Madison

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