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ARTICLE · 05 MAY 2015

Corporate Transactions And Operations - May 5, 2015

Grant Thornton LLP
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In a chief counsel advice memorandum (CCA 201515020) released April 10, the IRS concluded that it may disregard a taxpayer's participation in a transaction under the common law economic substance doctrine.

United StatesTax
Mel Schwarz
Mel Schwarz
Dustin Stamper
Dustin Stamper
Shamik Trivedi
Shamik Trivedi
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IRS concludes transaction may lack economic substance

In a chief counsel advice memorandum (CCA 201515020) released April 10, the IRS concluded that it may disregard a taxpayer's participation in a transaction under the common law economic substance doctrine (ESD).

Under the facts of the CCA, a taxpayer entered into a transaction with a broker that consisted of two legs: (i) a loan and (ii) a prepaid forward contract.

The loan was made by the broker, as a lender, to the taxpayer as the borrower. The loan had a stated principal amount and provided for 64 quarterly installments of interest and principal over a 20-year period. The proceeds of the loan were used by the taxpayer to purchase a prepaid forward contract from the broker.

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