Trends In Interpreting Key Judicial Doctrines

Front 1

Gregory v. Helvering (1935)

Back 1

J. Sutherland - Putting aside, then, the questsion of motice in respect to taxation altogether...what do we find? Simply an operation having no business or corporate purpose....

Front 2

Knetsch v. U.S. (1960)

Back 2

J. Brennan - Knetsch's transaction with the insurance company did "not appreciably affect his beneficial interest except to reduce his tax..." .... there was nothing of substance to be realized by Knetsch from this transaction beyond a tax deduction.

Front 3

Frank Lyon Co. v. United States (1978)

Back 3

J. Blackmun - Where, as here, there is a genuine multiple-party transaction with economic substance which is compelled or encouraged by business or regulatory realities, is imbued with tax-independent considerations, and is not shaped soley by tax-avoidance features that have meaningless lables attached, the Government should honor the rights and duties effectuated by the parties.

Front 4

Rice's Toyota World, Inc. v. Comm'r (4th Cir. 1985)

Back 4

To treat a transaction as [an economic] sham, the court must find that the taxpayer was motivated by no business purpose other than obtaining tax benefit... and that transaction has no economic substance because no reasonable possibility of profit exists.

Front 5

Sochin v. Comm'r (9th Cir. 1988)

Back 5

the consideration of business purpose and economic substance are simply more precise factors to consider in the [determination of] whether the transaction had any practical economic effects other than the creation of income tax losses.

Front 6

ACM Partnership v. Comm'r (3rd Cir. 1988)

Back 6

these distrinct aspects of the economic sham inquiry do not constitute discrete prongs of a rigid two-step analysis of whether the transaction had sufficient substance, apart from its tax consequences, to be respected for tax purposes....

Front 7

Coltect Indus. v. U.S. (Fed. Cir. 2006)

Back 7

We thing that the rule adopted by the fourth circuit and reiterated in Black & Decker - that a transaction will be disregarded only if it both lacks economic substance and is motivated solely by tax avoidance - is not consistent with the Supreme Court's pronouncements in cases such as Frank Lyon.

Front 8

Coltec - II

Back 8

The Supreme Court cases and our predecessor court's case have repeatedly looked to the objective reality of the transaction in assessing its economic substance.

Front 9

Coltec - III

Back 9

the transaction to be analyzed is the one that gave rise to the alleged tax benefit

Front 10

Coltec - IV

Back 10

The taxpayer has not demonstrated any business purpose to be served by linking Garrison's assumption of the liabilities to the centralization of litigation management.

Front 11

What are the five principles relied on in Coltec?

Back 11

1-Taxpayers can intend to reduce taxes, as long as transaction has economic subtance;
2-Taxpayer has burden of proving economic substance;
3-Economic substance is an objective test;
4-The transaction that must have economic substance is the one that produces the tax benefit;
5-Related party transactions subject to scrutiny

Front 12

What is the proposed Codified version of the Economic Substance doctrine?

Back 12

A transaction has economic substance if it: (1) had a non-federal tax purpose; and (2) changes the taxpayer's economic position in a meaningful way.