Tax Matters

Vol. 2, No. 2

Each edition of Tax Matters consists of free-flowing responses by three tax practitioners to a question regarding a current issue in tax law and policy. Tax Matters commentaries provide insightful perspectives on a broad range of topics, making important contributions to the dialogue within the tax bar about cutting-edge issues. Although the commentaries are certainly of interest to the academic community, they are primarily directed toward tax professionals and their clients.

Codification of the Economic Substance Doctrine in 2010 – after years of controversy about whether codification was actually desirable – has generated a very substantial body of professional commentary, chiefly aimed at determining what the effect of the new provision is likely to be. Does the new Code section, section 7701(o), narrow the scope of traditional “tax planning” or do the planning maneuvers relied on in the past continue to be fully reliable? The question gains urgency from the addition of a penalty provision that is automatic in application and that tops out at 40% of understated income where the understatement is the consequence of an ESD infraction. Reactions by practitioners appear below.

Marvin A. Chirelstein, Professor Emeritus of Law, Columbia Law School

Thoughts on the Economic Substance Doctrine

Michael Schler

Has Codification Changed the Economic Substance Doctrine?

David Hariton

Codified Economic Substance Doctrine

Peter H. Blessing