The IRS on Oct. 9 issued a notice providing additional guidance
on the codification of the economic substance doctrine and related
penalty amendments.
Notice 2014-58 amplifies Notice 2010-62, and
provides guidance on the definition of "transaction" in
applying the economic substance doctrine under Section 7701(o) and
on the meaning of "similar rule of law" under the Section
6662(b)(6) accuracy-related penalty. It is effective for
transactions entered into after March 30, 2010.
Congress codified the doctrine in 2010 by adding Section
7701(o), which states that a transaction has economic substance if
it meets a two-part test: The transaction must change in a
meaningful way, apart from federal income tax effects, a
taxpayer's economic position, and the taxpayer must have a
substantial purpose, aside from federal income tax effects, for
entering into the transaction.
