Document Type

Working Paper

Publication Date

4-21-2010

SSRN Discipline

ARN Subject Matter eJournals; LSN Subject Matter eJournals; Tax Law & Policy eJournals; Public Economics eJournals; ERN Subject Matter eJournals; Financial Economics Network; Management Research Network; Economics Research Network; Legal Scholarship Network; Corporate, Securities & Finance Law eJournals; Capital Markets eJournals; Law School Research Papers - Legal Studies; FEN Subject Matter eJournals; Law & Society eJournals; Law & Society: Public Law eJournals; Law School Research Papers - Public Law & Legal Theory; Accounting Research Network

Abstract

While the doctrine of substance over form has been a part of tax law for over seventy years courts look disfavorably upon taxpayers who invoke the doctrine to argue against the forms of their own transactions under what is commonly referred to as the Danielson rule Although the Danielson rule appears sound on its face it holds less force when applied outside of its original context In particular the Danielson rule should not apply when the form given to a transaction is given for nontax reasons such as to achieve a particular accounting treatment The taxation of credit card securitizations provides a particularly acute example of how the Danielson rule could lead taxing authorities to erroneously base the taxation of a transaction on its form for accounting purposes In this article I explain why the Danielson rule should not apply to credit card securitizations First I describe how credit card securitizations are structured and how they are treated under both the accounting and the tax rules I then explain the origins and purposes of the Danielson rule why it should not apply to credit card securitizations and how it could adversely affect their taxation if applied By expressly excluding from the scope of the Danielson rule those transactions where the difference between substance and form is rooted in the difference between the accounting and tax regimes the government will clarify a currently muddled area of law and provide greater certainty to participants in credit card securitizations and similar transactions

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