Summa Holdings: the relevance of congressional intent in applying the economic substance doctrine

In 2010, Congress added section 7701(o) to the Internal Revenue Code, better known as the "economic substance doctrine." The doctrine, which had developed in the courts, denies tax benefits to transactions that lack "economic substance." This is often the case where a transaction has no purpose other than tax avoidance and no real economic effect beyond taxes. One of Congress's motivations in enacting Code Sec. 7701(o) was to clarify the application of the doctrine, which had taken diverse forms in the various Circuit Courts of Appeals. The article is divided into six parts. Part II provides an overview of the economic substance doctrine, both before and after the enactment of Code Sec. 7701(o). Readers who are familiar with the doctrine should feel free to skip this material. Part III discusses Summa Holdings. Parts IV and V present arguments for and against using Summa Holdings' reasoning as the framework for future relevance determinations, and Part VI provides concluding observations.