ABA Tax Section Pushes IRS for Economic Substance Doctrine Guidance

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The ABA Section of Taxation urges IRS to provide more guidance under the codified economic substance doctrine, with the highest priority on guidance to establish a framework under which the doctrine would be considered relevant to a particular transaction. Although officials have said IRS is unlikely to provide further published guidance, the tax section says the failure to do so “is likely to result in the inappropriate assertion of the economic substance doctrine, and the associated strict liability penalty.” The 66-page letter urges IRS to set out guidelines for when the doctrine would be considered relevant to a transaction, a key principle of the statute.