U.S. CAPTIVE INSURANCE LAW
  • Welcome
  • Basic Information
    • Who Should Form a Captive?
    • Convert To A Pure Captive
    • How We Work
  • Following the Rules
    • Introduction to Anti-Avoidance Law
    • Substance Over Form
    • Sham Transaction
    • Step Transaction Doctrine
    • The Economic Substance Doctrine
  • Articles
  • Blog
  • About US

The Substance Over Form Doctrine

The substance over form doctrine states that the tax results of a transaction should be based on the underlying substance of the transaction, not mere compliance with individual formalities along the way to the result.  Taxpayers are usually bound to the tax consequences of their chosen legal form, but the IRS and courts may re-characterize a transaction according to its underlying substance, if that substance is demonstrably contrary to the form.  In applying the substance over form doctrine, a court will look to the objective economic realities of a transaction rather than mere form.  The rationale behind the doctrine is that two transactions that achieve the same ultimate goal should not garner different tax treatment simply because the transactions follow different formal steps along the way.  The burden of proof rests on the taxpayer to show that the form of the transaction matched its substance.

  • Welcome
  • Basic Information
    • Who Should Form a Captive?
    • Convert To A Pure Captive
    • How We Work
  • Following the Rules
    • Introduction to Anti-Avoidance Law
    • Substance Over Form
    • Sham Transaction
    • Step Transaction Doctrine
    • The Economic Substance Doctrine
  • Articles
  • Blog
  • About US