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Economic Substance of Complex Transactions |
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For transactions entered into after March 30, 2010, Congress has clarified that where the judicial economic substance doctrine applies, the transaction must 1) change the economic position of the taxpayer(apart from Federal income tax effects) in a meaningful way, and 2) there must be a substantial non-Federal-income tax purpose for the transaction. If these two requirements are not met, the transaction will not be respected for Federal income tax purposes. There is a 20% to 40% penalty for tax understatements resulting from transactions lacking economic substance. Trader entities need to be structured with appropriate economic substance. We have advised traders to use structures with "economic substance." If your entity may be structured for tax benefits, but may be lacking the necessary "economic substance" we can work with you to correct the situation, including, if necessary, closing down your existing tainted entities and beginning a new properly set-up trader's entity program. links: Wikipedia definition of Economic Substance U.S. tax Court on the attack against certain planners using dual-entity tax motivated structures IRS Begins Enforcing "Economic Substance Doctrine" ABA Tax Section Report on the Economic Substance Doctrine Codification of the economic substance doctrine Economic Substance Doctrine Codified in New Legislation Codification of the Economic Substance Doctrine by the Health Care and Education Affordability Reconciliation Act of 2010 (pdf)
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February 01, 2011 TraderStatus™, TradersTaxPlan™, TradersAdvantage™, TraderStatus.com™, TradersTaxPlan.com™, TradersAdvantage.com™, DoYourOwnDaytraderTaxes™, DoYourOwnTaxes™, DoingYourOwnTaxes™, DoYourOwnDaytraderTaxes.com™, DoYourOwnTaxes.com™, DoingYourOwnTaxes.com™, DoYourTaxesOnline™, DoYourOwnTaxesOnline™, DoYourTaxesOnline.com™, and DoYourOwnTaxesOnline.com™ are trademarks and service marks of Colin M. Cody, CPA and TraderStatus.com, LLC, Trumbull Connecticut Copyright© 2011 Colin M. Cody, CPA and TraderStatus.com, LLC, All Rights Reserved |
