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IRS Says It Won't Give Advance Guidance on Transactions Under Codified Economic Substance Doctrine - Emil Estafanous, CPA : Emil Estafanous, CPA

IRS Says It Won’t Give Advance Guidance on Transactions Under Codified Economic Substance Doctrine

The IRS released a initial superintendence on a newly codified mercantile piece doctrine on Sep 13 (Notice 2010-62). In general, a IRS says it will make a two-prong exam mandated in a Code and will not emanate superintendence on possibly specific exchange pass muster.

The mercantile piece doctrine was creatively combined by a courts to nullify a transaction’s taxation advantages if a transaction does not have mercantile substance. In March, a Health Care and Education Reconciliation Act of 2010, P.L. 111-152, codified a doctrine in Sec. 7701(o). Under a Code, a transaction will be treated as carrying mercantile piece usually if (1) a transaction changes a taxpayer’s mercantile position in a suggestive approach (apart from a sovereign income taxation effects), and (2) a taxpayer has a estimable purpose (apart from sovereign income taxation effects) for entering into a transaction. This two-prong exam relates to exchange entered into after Mar 31, 2010.

The notice says that a IRS will continue to rest on applicable box law interpreting a common law mercantile piece doctrine when requesting a two-prong exam underneath Sec. 7701. However, a IRS says that taxpayers can't rest on before box law that hold that exchange had mercantile piece if they confident possibly stump of a test—the Code mandates a conjunctive test, requiring both prongs to be met.

The notice also says that a IRS’ research of when a mercantile piece doctrine relates will be a same is it was before to a dramatization of Sec. 7701(o), unchanging with a charge of Sec. 7701(o)(5)(C), that provides that a integrity of possibly a transaction is theme to a mercantile piece doctrine will be done in a same demeanour as if a doctrine had not been codified.

The IRS says it does not intend to emanate ubiquitous superintendence on possibly a mercantile piece doctrine relates to specific forms of exchange and will not emanate private minute rulings or integrity letters on possibly a mercantile piece doctrine is applicable to any transaction or possibly any transaction complies with a mandate of Sec. 7701(o).

The IRS has asked for comments on this notice, that should be submitted by Dec 3, 2010. Comments can be e-mailed to Notice.Comments@irscounsel.treas.gov and should embody “Notice 2010-62” in a theme line.

About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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