Tax Shelters or Efficient Tax Planning? A Theory of the Firm Perspective on the Economic Substance Doctrine

T. Christopher Borek, Angelo Frattarelli and Oliver Hart

Journal of Law and Economics, 2014, vol. 57, issue 4, 975 - 1000

Abstract: Courts have articulated a number of legal tests to distinguish corporate transactions that have a legitimate business or economic purpose from those carried out largely, if not solely, for favorable tax treatment. We outline an approach to analyzing the economic substance of corporate transactions based on the property rights theory of the firm and describe its application in two recent tax cases.

Date: 2014
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