In the Headlines
June 5, 2024

Win May Embolden IRS Use of Economic Substance Doctrine

Tax attorney Joshua Odintz was quoted in a Law360 article about the potential implications of the Internal Revenue Service's (IRS) successful application of the economic substance doctrine in a recent case against Liberty Global. The court's decision to deny Liberty Global's $109 million refund claim, on the grounds that the transactions generating the refund lacked economic substance and were structured to exploit foreign tax perks, has raised concerns among practitioners. They worry that this broad application of the doctrine could put even routine business transactions at risk of being characterized as lacking economic substance. Mr. Odintz highlighted the strict liability penalty regime under Internal Revenue Code Section 6662(b)(6) as a "game changer" in the 2010 law formally enacting the doctrine.

The regime "does not allow a taxpayer to rely on an exception to that penalty," he said, adding that an opinion letter from a trusted adviser that discussed the business purpose of entering into that disputed transaction would be irrelevant.

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