Tax Insight

US Court of Appeals rules against Liberty Global citing economic substance doctrine

Insight
6 minute read
April 30, 2026

What happened?

A three-judge panel of the United States Court of Appeals for the Tenth Circuit (Circuit Court), in a 2-1 opinion filed April 21, 2026, affirmed the District of Colorado’s judgment denying Liberty Global, Inc.’s refund claim arising from its 2018 Project Soy’ transactions. The Circuit Court held that the codified economic substance doctrine in Section 7701(o) was relevant to Project Soy and could be applied to disregard the first three steps of the transaction, which the taxpayer stipulated did not meaningfully change its economic position or serve a substantial non-tax purpose.

Why is it relevant?

The Circuit Court held that the economic substance doctrine is ‘relevant’ where a taxpayer applies the Code provisions to obtain a tax benefit not intended by Congress, and that codification did not narrow application of the doctrine to exclude those transactions. It also signals that courts could analyze an integrated series of steps as a single transaction under Section 7701(o)(5)(D), even where some component steps resemble basic business transactions in isolation.

Actions to consider

Tax departments should reassess transactions that generate favorable tax benefits that may be viewed as not intended by Congress and their underlying documentation. Specifically, they should revisit documentation of non-tax business purposes, the potential analysis by the IRS or a court of the economic substance of individual steps of a transaction as well as the transaction in its entirety, and whether a claimed result could be viewed as relying on a statutory gap.