Codification of the Economic Substance Doctrine


Erik M. Jensen


In March 21, Congress codified a version of the economic substance doctrine, together with a stringent strict-liability penalty that applies if noncompliance with the doctrine leads to an underpayment of tax. This article provides guidance to investors and their advisors about the significance of the doctrine, discussing, among other things, the effects of codification, interpretive issues arising from the statutory language, and the lack of guidance about the transactions to which the doctrine applies. The article concludes that codification is something that everyone must pay attention to, but that many of the concerns raised by commentators about its scope have been overstated.


economic substance doctrine, strict liability, taxation, statutory interpretation, investment

Publication Date


Document Type


Place of Original Publication

Journal of Taxation of Investments

Publication Information

27 Journal Taxation of Investments 87 (2010)

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COinS Erik M. Jensen Faculty Bio