The Internal Revenue Service has issued a directive to provide guidance to IRS examiners and their managers on how to determine when, during an examination, it is appropriate to seek the approval of the Director of Field Operations in order to raise the economic substance doctrine. Once an examiner determines that raising the doctrine may be appropriate, this directive sets forth a series of inquiries the examiner must develop and analyze in order to seek approval for the ultimate application of the doctrine in the examination. The economic substance doctrine, which generally requires tax-related transactions to have economic substance, was incorporated into the federal tax code by the Health Care and Education Reconciliation Act of 2010.

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