When will a court disregard a trust for federal tax purposes? The Tax Court’s recent opinion in Wegbreit v. Commissioner demonstrates the pitfalls when a court finds that a trust should be disregarded for tax purposes. But first of all: What is a trust? A trust is an entity or relationship created and governed under state (or other) law. …
The economic substance doctrine has long been a part of the tax law. Although it was only codified in the Internal Revenue Code in 2010,[1]the doctrine has been used by the IRS and courts for years to disregard non-compliant transactions.[2]This post provides a brief primer on the economic substance doctrine, the interplay between the statute and the case law that …
