Mazzei v. Commissioner of Internal Revenue, No. 18-72451 (9th Cir. 2021)Annotate this Case
The Ninth Circuit joined its sister circuits in concluding that, when Congress expressly departs from substance-over-form principles, the Commissioner may not invoke those principles in a way that would directly reverse that congressional judgment.
The panel reversed the tax court's decision in favor of the Commissioner on a petition for redetermination of federal excise tax deficiency where petitioners established a Foreign Sales Corporation to reduce the tax paid on income that was then distributed as dividends to Roth Individual Retirement Accounts (IRAs). The panel concluded that the unusual statutory provisions at issue here expressly elevated form over substance in the relevant respects, and thus the tax court erred by invoking substance-over-form principles to effectively reverse that congressional judgment and to disallow what the statute plainly allowed.