Tax Strategies Flashcards

Which judicial doctrine, originating in Gregory v. Helvering (1935), denies tax benefits to transactions lacking a genuine non-tax purpose?

Answer: Business purpose doctrine

Gregory v. Helvering held that a reorganization without a business purpose would be disregarded.

Under IRC Section 7701(o), what is the penalty rate for an undisclosed transaction that lacks economic substance?

Answer: 40%

Section 6662(i) doubles the accuracy penalty to 40% for nondisclosed noneconomic substance transactions.

Which doctrine collapses a series of formally separate steps into a single transaction for tax purposes?

Answer: Step transaction doctrine

The step transaction doctrine treats interdependent steps as one integrated transaction.

Lucas v. Earl (1930) established which principle relevant to income-shifting schemes?

Answer: Income is taxed to the person who earns it

Lucas v. Earl held that earned income cannot be shifted to another person by anticipatory assignment.

Taxpayers participating in an IRS 'listed transaction' must disclose it on which form?

Answer: Form 8886

Form 8886, Reportable Transaction Disclosure Statement, is required for listed and other reportable transactions.

IRC Section 482 authorizes the IRS to reallocate income among commonly controlled entities to reflect what standard?

Answer: Arm's length pricing

Section 482 transfer pricing rules require related-party transactions to reflect arm's length terms.

Under IRC Section 267, a loss on the sale of property between which parties is generally disallowed?

Answer: A taxpayer and his sibling

Section 267 disallows losses on sales between related parties, including siblings, spouses, ancestors, and lineal descendants.