A Tax Opinion that Didn’t Carry the Day.

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The Fifth Circuit recently applied the economic substance doctrine to a transaction involving foreign currency straddles, sustaining the government’s position.

While the Court’s analysis of the economic substance seems solid, its treatment of the good faith defense to a negligence penalty troubles me a bit. My concern is that the Court apparently views the sufficiency of a tax opinion to be a fact question, even though that requires the application of law (regulations governing the sufficiency of tax opinions) to fact.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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