The business purpose, step-transaction, and substance-over-form doctrines may limit the income shifting strategy.

Question

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The business purpose doctrine requires that a transaction must have a legitimate, non-tax-related business purpose to be recognized for tax purposes.
 
The step-transaction doctrine analyzes a series of related transactions as a whole to determine their tax treatment, rather than looking at each transaction in isolation.

The substance-over-form doctrine examines the economic substance of a transaction rather than its form to determine its tax treatment.

All of these doctrines can limit the effectiveness of an income shifting strategy if the transactions are not deemed to have a genuine business purpose or are structured in a way that is primarily focused on tax avoidance.

The Business Purpose, Step-Transaction, and Substance-Over-Form Doctrines May Limit the Income