Final answer:
The business purpose, step-transaction, and substance-over-form doctrines are principles that prevent tax avoidance by requiring transactions to have a legitimate business purpose, reflecting their true economic nature, and not just their formal legal structure.
Step-by-step explanation:
The business purpose doctrine addresses the intention behind business transactions, ensuring they have a valid business reason beyond merely reducing tax liabilities. The step-transaction doctrine allows tax authorities to collapse a series of formally independent but related steps into a single transaction to understand its true nature for tax purposes. Lastly, the substance-over-form doctrine ensures that the tax consequences of a transaction reflect its economic reality, rather than how it is formally structured.
These doctrines potentially inhibit tax planning strategies that rely on complex transactions specifically designed to exploit differences between the legal form of a transaction and its economic substance to achieve a more favorable tax treatment. By scrutinizing the purpose, the true nature, and the actual substance of transactions, tax authorities can challenge and disallow artificial tax avoidance schemes.