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Tax Shelters or Efficient Tax Planning? A Theory of the Firm Perspective on the Economic Substance Doctrine

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  • T. Christopher Borek
  • Angelo Frattarelli
  • Oliver Hart

Abstract

Courts have articulated a number of legal tests to distinguish corporate transactions that have a legitimate business or economic purpose from those carried out largely, if not solely, for favorable tax treatment. We outline an approach to analyzing the economic substance of corporate transactions based on the property rights theory of the firm and describe its application in two recent tax cases.

Suggested Citation

  • T. Christopher Borek & Angelo Frattarelli & Oliver Hart, 2014. "Tax Shelters or Efficient Tax Planning? A Theory of the Firm Perspective on the Economic Substance Doctrine," Journal of Law and Economics, University of Chicago Press, vol. 57(4), pages 975-1000.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/680929
    DOI: 10.1086/680929
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    References listed on IDEAS

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    Cited by:

    1. Durnev, Art & Li, TieMei & Magnan, Michel, 2016. "Are offshore firms worth more?," Journal of Corporate Finance, Elsevier, vol. 36(C), pages 131-156.
    2. Oliver Hart, 2017. "Incomplete Contracts and Control," American Economic Review, American Economic Association, vol. 107(7), pages 1731-1752, July.
    3. Peter Gerbrands & Brigitte Unger & Joras Ferwerda, 2022. "Bilateral responsive regulation and international tax competition: An agent‐based simulation," Regulation & Governance, John Wiley & Sons, vol. 16(3), pages 760-780, July.

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