I think I have a problem with punishing someone for violating the spirit of a law when they haven't violated the actual limitations imposed by the law.
I kind of do, too.
Apparently, the Supreme Court had no problem with it, though when it sided with IRS Commissioner Helvering...
en.wikipedia.org
I don't think the article addresses it, but my [rusty] recollection of the opinion in this case is that the taxpayer boldly announced in court words to the effect of, "Yes, the reason I structured the transaction like I did was to avoid the taxes. The law said if I did this, there would be no tax liability, so that's what I did; there was no other reason for having done the transaction but to save taxes".
Wrong answer.
The Courts view (from the article):
"It is earnestly contended on behalf of the taxpayer that since every element required by [the statute] is to be found in what was done, a statutory reorganization was effected; and that the motive of the taxpayer thereby to escape payment of a tax will not alter the result or make unlawful what the statute allows. It is quite true that if a reorganization in reality was effected within the meaning of [the statute], the ulterior purpose mentioned will be disregarded. The legal right of a taxpayer to decrease the amount of what otherwise would be his [or her] taxes, or altogether avoid them, by means which the law permits, cannot be doubted. [ . . . ] But the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended. The reasoning of the court below [i.e., the reasoning of the Court of Appeals] in justification of a negative answer leaves little to be said." |
