The business purpose doctrine:
A)Requires a transaction to be initiated by a business
B)Requires a transaction to benefit the business owner
C)Requires the transaction to have an economic purpose other than tax avoidance
D)Requires the treatment of a transaction to be based on reality not appearances

Question

Quizplus · Accepted Answer

The business purpose doctrine requires that a transaction must have a legitimate, economic purpose beyond merely reducing taxes for it to be considered valid for tax purposes. This doctrine is used to prevent tax evasion through transactions that have no real economic substance other than tax savings.

The Business Purpose Doctrine