IRS Economic Substance Doctrine Guidance Draws Mixed Reviews

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Oct. 9 — The IRS offered more guidance under the codified economic substance doctrine, in a move that one practitioner said could signal a more aggressive approach in determining whether transactions have such substance, while another said it contains welcome carveouts.
The Internal Revenue Service issued Notice 2014-58 on Oct. 9 to “amplify” Notice 2010-62, the IRS's first guidance on the codified doctrine. Under that doctrine, transactions won't get tax benefits if they lack economic substance or a business purpose (176 DTR G-5, 9/14/10).
The notice clarified both the definition of a transaction in applying the doctrine, and the meaning of “similar rule of law” in applying the accuracy-related penalty.

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