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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