How Big Is Sixth’s Circuit’s Attack On IRS Substance Over Form Rule?
I have to admit that I was not that familiar, familiar at all really, with 7701(o), which was added in 2010. My excuse is that I have not been involved in designing sketchy tax shelters and 7701(o) has not been around long enough to show up in a lot of case law, since it is only applicable to post-enactment transactions. 7701(o) codifies the economic substance doctrine indicating that a transaction will not be recognized unless it changes a taxpayer’s economic position in a meaningful way beyond tax savings and has a substantial purpose beyond income tax effects.
Conservative Judge Okays Huge Roth IRA Tax Shelter, Slams IRS Substance Over Form
Wholesale rejection of the substance over form doctrine can end up disproportionately favoring those that have the “time and patience (and money)” to construct hyper-technical arguments that arguably follow the Code – maybe. This could be a set up for another raid on the Treasury like the one that was engineered by law firms and the Big 4 in the nineties and around the turn of the millennium. See Confidence Games by Tanina Rostain and Milton Regan.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.