Question

1. Economic substance doctrine,. Purpose of the business doctrine, and Substance over form doctrine are socially beneficial?

Answer 1

ANSWER:-

The different and alternating foci on economic reality and business purpose in the Federal Circuit’s opinion can also be interpreted as, in effect, a conjunctive application of the more common two prong economic reality and business purpose test.

Although the court did not state specific that the test is a two-prong conjunctive test, the implication is that a transaction that lacks either economic reality or a business purpose may be disregarded because it lacks economic substance.

It is possible to read the Federal Circuit’s opinion as articulating a single test focused on economic reality and not on business purpose.

The court states in the beginning of its economic substance discussion that, the doctrine may well also apply if the taxpayer’s sole subjective motivation is tax avoidance even if the transaction has economic substance, a lack of economic substance is sufficient to disqualify the transaction without proof that the taxpayer’s sole motive is tax avoidance. has done little to change the doctrine’s application.131 Others have noted that the codified version of the doctrine requires stricter scrutiny by requiring both a “meaningful” change in the taxpayer’s economic position, as well as a “substantial purpose”