A Principal Purpose: There Can Be Only One

June 2013


Tax Analysts is launching a new column, Willis Weighs In, written by Benjamin Willis of PricewaterhouseCoopers's National Tax Services Mergers & Acquisitions group. Willis’s first column explores the confusion created by the different interpretations of the principal purpose of tax avoidance standard. Willis explains why the IRS should adhere to the Supreme Court’s conclusion that the term ‘‘principal’’ is synonymous with ‘‘of first importance.’’

“The principal purpose of tax avoidance standard (the standard) was seemingly well understood by all, at least until recently,” Willis writes. “The historic interpretation of the standard is consistent with the government’s long-standing announced policy of eliminating confusing tax rules. Nonetheless, in recent regulations the IRS appears to present paradoxical interpretations of the standard, contrary to the government’s stated policies on drafting regulations and common-sense meanings.”

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