At a fundamental level, this Article is about interpretation. The best way for a court to remain faithful to a complicated statute reflecting a delicate legislative compromise is to enforce its language literally without introducing extraneous tests or elements that cannot be found in the statutory language. Yet, it is important to be clear that it approaches the question from an ex ante perspective, from where things stood before Learned Hand's famous opinion.
This Article is not a call for the judicial reversal of Hand's opinion. Given the value of the predictability of established expectations as to statutory meaning, stare decisis is at its strongest when applied to statutory interpretation.
The business purpose requirement is now reflected in a Treasury Regulation that is entitled to a high degree of deference. Congress has had multiple opportunities to eliminate it and has not so done.
No, this Article is not an argument for the judicial reversal of a familiar old decision. It advances the claim that, as of the time the court faced the decision, the outcome it selected was incorrect from multiple policy perspectives and therefore a counterproductive exercise of the interpretive authority. Moreover, at the time decided, it was a mistaken use of the interpretive authority to upset a carefully set legislative compromise in favor of the court's own preferred outcome.
Before proceeding, a further caveat is necessary. Although the Supreme Court upheld Hand's opinion unanimously, this Article focuses primarily on Hand's opinion for the Second Circuit for good reasons. His is the more frequently quoted of the two opinions. His opinion is the more extensive of the two. It sets out more thoroughly the justification for creating a business purpose requirement, while the Supreme Court opinion largely relies on its reference to Hand's opinion.
Polito, Anthony P.
"Helvering v. Gregory: All the Perspectives from which Learned Hand Was Wrong,"
Akron Tax Journal: Vol. 29
, Article 3.
Available at: https://ideaexchange.uakron.edu/akrontaxjournal/vol29/iss1/3