Codification of the Economic Substance Doctrine
Journal of Taxation of Investments, p. 87, Winter 2011
Posted: 2 Sep 2011 Last revised: 5 Sep 2011
Date Written: September 1, 2011
In March 2010, Congress codified a version of the economic substance doctrine, together with a stringent strict-liability penalty that applies if noncompliance with the doctrine leads to an underpayment of tax. This article provides guidance to investors and their advisors about the significance of the doctrine, discussing, among other things, the effects of codification, interpretive issues arising from the statutory language, and the lack of guidance about the transactions to which the doctrine applies. The article concludes that codification is something that everyone must pay attention to, but that many of the concerns raised by commentators about its scope have been overstated.
Keywords: economic substance doctrine, strict liability, taxation, statutory interpretation, investment
JEL Classification: K34
Suggested Citation: Suggested Citation