Throughout the early history of the United States income tax law, the courts eagerly scrutinized tax transactions to ensure that their substance comported with their form. The courts developed a common law ensuring that tax transactions were also in keeping with the purpose of the legislation. Recently, courts of the United States appear much more reluctant to intervene to impose purpose over form. Given the rise of textualism - giving a statute its ordinary meaning according to its text, as opposed to inquiring into non-textual sources such as the intent of the legislature - as the preferred mode for judicial interpretation of tax legislation, nothing more than compliance with the statutory language is required. Accordingly, another branch of government, the legislature, is increasingly intervening by statutory provisions to guard against tax avoidance.
Postlewaite, Philip F.
"The Status of the Judicial Sham Doctrine in the United States,"
Revenue Law Journal: Vol. 15
, Article 8.
Available at: https://epublications.bond.edu.au/rlj/vol15/iss1/8