Economic Substance Doctrine Codified: Surviving Scrutiny Under New IRC Section 7701(o)

Structuring Business Transactions and Understanding the New Audit Landscape

Healthcare reform law codifies common law doctrine formerly in conflict

Recording of a 90-minute premium CLE/CPE webinar with Q&A

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Conducted on Wednesday, May 19, 2010

Recorded event now available

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Course Materials

This CLE and CPE course will advance the knowledge of tax practitioners regarding the new IRS Code provisions on the economic substance doctrine. The seminar will analyze the impact of the new rules for transactional tax planning and review key case law that may be used to interpret the new rules.


The healthcare reform bill codifies the economic substance doctrine, one of several provisions to raise revenue to help pay for healthcare reform. While the new Code provisions purport to add clarity and consistency for taxpayers, it is far from clear that these new rules will benefit taxpayers.

Given the uncertainty regarding IRS application of the new rules, the stakes are high for companies considering even tried and true transactions. Transactional tax planning practitioners must be vigilant in assessing whether a particular transaction will satisfy this new economic substance test.

The new legislation imposes a strict liability penalty of 20% for failing to satisfy the economic substance test, which will likely result in more aggressive use of the doctrine by the IRS in corporate audits.

Listen as our authoritative panel of tax attorneys guides you through the new Code provisions codifying the economic substance doctrine and analyzes the impact of these new rules on tax planning and tax controversy disputes.



  1. Analysis of new Code provisions
    1. How we got here
    2. New economic substance tests
    3. Technical explanation to Act — application to basic business transactions
    4. Penalties — strict liability
      1. 20% for disallowed tax
      2. 40% for nondisclosed transactions
  2. Impact of new provisions
    1. Impact on transactional tax planning
    2. Impact on the audit landscape
  3. Case law that may be used to interpret new rules and defend against IRS challenges


The panel will review these and other key questions:

  • What are the new tests for economic substance—and how are they different than the common law tests?
  • What effect does profit potential have, and how will pre-tax profits be calculated?
  • How are the codification and penalties expected to affect the audit landscape?


Alex Sadler
Alex Sadler

Crowell & Moring

He specializes in representing taxpayers in controversies with the IRS. He handles all aspects of tax litigation, from...  |  Read More

Phillip A. Pillar
Phillip A. Pillar

Greenberg Traurig

His practice concentrates on representing and advising clients in federal, state and international tax issues before...  |  Read More

Jeremiah Coder
Jeremiah Coder

Contributing Editor
Tax Analysts

He is a contributing editor at Tax Analysts, where he writes on a wide variety of tax law issues with a particular...  |  Read More

Bryon Christensen
Bryon Christensen
Attorney Advisor
US Department of the Treasury

He is an attorney advisor in the Treasury Department's Office of Tax Policy, where he focuses on tax procedure and...  |  Read More

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