- 99 -
respect its form for tax purposes where the record shows that the
transaction was in fact a contrivance designed to obtain a tax
benefit not intended by Congress under the taxing statute.
The Court of Appeals for the District of Columbia Circuit
has considered the scope and application of the economic
substance doctrine. In Horn v. Commissioner, supra, the
Commissioner disallowed losses claimed by commodities dealers
with respect to so-called option-straddle transactions on the
ground that the transactions were economic shams. This Court
granted the Commissioner's motion for summary judgment,
sustaining the Commissioner's determination that the transactions
were devoid of economic substance. See Fox v. Commissioner,
supra.
On appeal, the Court of Appeals for the District of Columbia
Circuit reversed after concluding that Congress had intended to
allow the disputed losses pursuant to section 108 of the Tax
Reform Act of 1984 (Division A of the Deficit Reduction Act of
1984, Pub. L. 98-369, 98 Stat. 494, 630), as amended under the
Tax Reform Act of 1986 (TRA 1986), Pub. L. 99-514, sec. 1808(d),
100 Stat. 2817. For the text of section 108, and the 1986
amendment, see Glass v. Commissioner, 87 T.C. 1087, 1164-1166
(1986). After reviewing Supreme Court precedent and scholarly
articles on the subject, the Court of Appeals described the sham
transaction doctrine as follows:
Page: Previous 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 NextLast modified: May 25, 2011