“Form” Determines “Substance”: A Call to Reign in Tax Law's Substance-Over-Form Principle
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Authors
Wilson, Cody A.
Issue Date
2020
Volume
53
Issue
3
Type
Journal Article
Language
Keywords
Alternative Title
Abstract
INTRODUCTION|This Article illustrates that reigning in tax law’s substance-overform principle is necessary to preserve the Rule of Law. The principle is properly applied to restore reality to factual shams, but the principle
should never be used to justify a reading of the Code that the text will not bear. At best, courts are applying Fuller’s theory of jurisprudence and in the process are denying people their pre-existing right to obtain benefits provided to them by the Code. At worst, courts are deciding cases on an arbitrary, ad hoc basis and then citing cases to support their conclusion. Both scenarios are contrary to the Rule of Law.
To best understand these issues, the Article begins with Part II describing Gregory v. Helvering, the case that gave rise to the substance-over-from principle as it applies to American tax jurisprudence. Part II then briefly explains two specialized doctrines derived from the substance-over-form principle. Next, Part III criticizes the use of the substance-over-form principle to override the text of the Code through two subparts. First, Part III explains that applying Lon Fuller’s theory of jurisprudence to tax law denies people their pre-existing right to obtain benefits provided to them by the Code. The theory’s inappropriateness in tax law is made clear by discussing the Supreme Court’s application of the substance-overform principle in three different types of cases: a non-tax case, a quasitax case, and a pure tax case. Part III continues by discussing how the substance-over-form principle facilitates arbitrary, ad hoc decisions. To start, the principle undermines the U.S. Constitution because courts are tasked with interpreting the Code, not expanding it. Also, the principle allows courts to mask the true basis for their decisions, which may very well be arbitrary. Part IV concludes this Article by calling on the Supreme Court to overrule Gregory v. Helvering to the extent it allows judges to deny Code-compliant taxpayers their deserved benefits.
To best understand these issues, the Article begins with Part II describing Gregory v. Helvering, the case that gave rise to the substance-over-from principle as it applies to American tax jurisprudence. Part II then briefly explains two specialized doctrines derived from the substance-over-form principle. Next, Part III criticizes the use of the substance-over-form principle to override the text of the Code through two subparts. First, Part III explains that applying Lon Fuller’s theory of jurisprudence to tax law denies people their pre-existing right to obtain benefits provided to them by the Code. The theory’s inappropriateness in tax law is made clear by discussing the Supreme Court’s application of the substance-overform principle in three different types of cases: a non-tax case, a quasitax case, and a pure tax case. Part III continues by discussing how the substance-over-form principle facilitates arbitrary, ad hoc decisions. To start, the principle undermines the U.S. Constitution because courts are tasked with interpreting the Code, not expanding it. Also, the principle allows courts to mask the true basis for their decisions, which may very well be arbitrary. Part IV concludes this Article by calling on the Supreme Court to overrule Gregory v. Helvering to the extent it allows judges to deny Code-compliant taxpayers their deserved benefits.
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Publisher
Creighton University School of Law