U.S. Taxpayer M enters into a major restructuring of his business. Taxpayer M adopts a particular form for the restructuring, based on the advice of his financial consultant/tax advisor, whom Taxpayer M subsequently dismisses. Some months before filing his return, Taxpayer M learns from his new tax advisor that this form for the restructuring is treated unfavorably for U.S. tax purposes. Accordingly, Taxpayer M asks his tax advisor if he (Taxpayer M) can disavow the form of the transaction on his tax return. The new tax advisor says that she will need to dig into all the facts, but will consider whether Taxpayer M can validly take the position that the business substance of the transaction was different from its form, and that the transactions U.S. federal income tax consequences should be in accordance with that substance.

On the basis of these limited facts, make a preliminary estimate of Taxpayer Ms chances of success in disavowing the form of its transaction for U.S. tax purposes:

1. 90 percent or better, because courts prefer to tax a transaction in accordance with its substance, regardless of whether it is the IRS or the taxpayer arguing for substance.
2. Probably better than 50-50. Courts prefer to tax a transaction in accordance with its form, but they will look to substance if either the IRS or the taxpayer makes a good case for taxing in accordance with substance.
3. Significantly lower than 50-50, but there is some chance. It is much more difficult for a taxpayer than for the IRS to successfully argue substance over form, because the taxpayer chose that form, but it is possible.
4. Basically, none. While the IRS can argue substance over form to impose more tax, the courts will never accept a substance-over-form argument from a taxpayer, because the taxpayer chose the form which it is now trying to disavow.