The IRS may apply the step-transaction doctrine in a variety of taxpayer circumstances to deny tax benefits derived from a series of transactions that should more properly be treated as a single transaction.
The economics surrounding the COVID-19 pandemic may be causing many taxpayers to enter into transactions to preserve capital and reduce financial risk. The IRS may challenge the validity of transactions that appear primarily motivated by tax considerations.
To best defend a taxpayer's reported tax treatment of a series of transactions, taxpayers and their advisers should understand the possible grounds for a challenge of that treatment.