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Economic Substance And The Supreme Court, Amandeep S. Grewal

Andy Grewal

If an individual seeks a benefit under a congressionally-enacted statute, is a court obliged to examine that statute to determine whether he qualifies for that benefit? To many district and circuit courts, the answer to that question is a firm 'no.' This article argues that that approach is inappropriate and, despite the lower courts' assertion to the contrary, flatly inconsistent with applicable Supreme Court precedent.

Faced with a taxpayer's argument that he qualifies for a tax benefit, the lower courts have often chosen to apply the so-called economic substance doctrine rather than the internal revenue laws. Under that doctrine, courts …