Penalties and Retainer Letters After the Enactment of Economic Substance
As mentioned a few times on this blog, Congress codified the economic substance doctrine last year as part of the Health Care and Education Reconciliation Act of 2010. One of the aspects of the new law is the introduction of a strict liability penalty for engaging in transactions that lack economic substance. Before the enactment of the doctrine, usually, to avoid the 20% penalty under Sec. 6662 of the Code, funds either relied on “reasonable cause” or on “adequate disclosure.” However, newly amended Sec. 6662(b)(6) of the Code provides for a 20% penalty for “[a]ny...
March 11, 2011 read more
NYSBA Issues Report No. 1228 on Codification of the Economic Substance Doctrine
I personally find most of the NYSBA reports to be very comprehensive and informative. This report does not differ in this respect. The report addresses the codification of economic substance, an issue that has been talked about in length, and rightfully so. I recently wrote a separate piece on Notice 2010-62, the first eagerly awaited Treasury guidance on the issue. As I mentioned in that note, economic substance has an universal tax implication that is not limited only to the tax exposure of private equity, venture capital and hedge fund. As to funds, the report highlights...
January 07, 2011 read more