Question

In tax shelter cases, the courts rely heavily on the ___ ___ doctrine a) business purpose

b) substance over form
c) step transaction
d) arm's length

Answer 1

In tax shelter cases, the courts rely heavily on the substance over form doctrine, which emphasizes looking beyond formalities and focusing on the true substance or economic reality of a transaction. It prevents taxpayers from using artificial arrangements to reduce tax liabilities.

Step-by-step explanation:

In tax shelter cases, the courts rely heavily on the substance over form doctrine. This doctrine emphasizes the importance of looking beyond the formalities or structures of a transaction and focusing on its true substance or economic reality. It helps prevent taxpayers from using artificial or sham arrangements to improperly reduce their tax liabilities. For example, if a taxpayer enters into a complex series of transactions that achieve a particular tax result but lack a valid business purpose or economic substance, the substance over form doctrine allows the court to disregard the form and treat the transactions as a single transaction with the economic substance.