The codified economic substance doctrine: Making decisions in an uncertain world

July 2011


Taxpayer transactions entered into after March 30, 2010 are subject to the codified economic substance doctrine and related penalties. With adequate disclosure, those penalties can effectively be capped at 20% rather than 40%. Accordingly, as taxpayers prepare and file returns reflecting 2010 transactions, they should consider whether the economic substance doctrine could be considered relevant to their transaction and, if so, determine how to disclose the transaction.

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