Coltec Industries, Inc. v. U.S.: Changes Might Have Added Economic Substance

摘要

The "economic substance doctrine" is a judicially-created revenue rule of construction which allows a court to disregard for tax purposes transactions that fall within the literal terms of the Internal Revenue Code but lack economic substance or reality. The doctrine has the approval of the U.S. Supreme Court as well as federal appellate courts. Sometimes the doctrine is framed as one requiring a transaction to have a business purpose other than tax avoidance. The purpose of the doctrine is to prevent taxpayers from avoiding the intent of revenue legislation by complying with its literal terms by the utilization of fictitious transactions.