Economic substance

Economic substance is a doctrine in the tax law of the United States under which a transaction must have an economic purpose aside from reduction of tax liability in order to be considered valid. This doctrine is used to determine whether tax shelters, or strategies used to reduce tax liability, are considered "abusive" by the Internal Revenue Service.^[1]

References to the Economic Substance Doctrine were enacted as subsection (o) of section 7701 of the Internal Revenue Code by section 1409 of the Health Care and Education Reconciliation Act of 2010.^[2][3]

See also

• Step transaction doctrine
• Substance over form
• Gregory v. Helvering

References

1. The Economic Substance Doctrine in the Current Tax Shelter Environment: Remarks by Donald L. Korb, Chief Counsel of the Internal Revenue Service
2. "The Obameter: Require economic justification for tax changes". PolitiFact.
3. Sec. 1409, Pub. L. No. 111-152, 124 Stat. 1029, 1067 (March 30, 2010).

Further reading

• Black, Stephen (2008). "A Daddy-Daughter Chat About Economic Substance". Retrieved April 12, 2016.