Commercial substance test: disregard arrangements whose economic effect differs from form, focusing on round-trips and artificial parties.
An arrangement may be disregarded for tax purposes if it lacks commercial substance, determined by whether the overall economic effect differs materially from its formal steps; key indicators include round-trip financing, an accommodating party, offsetting elements, disguised transactions, relocations made for tax benefit, and arrangements that do not materially affect business risks or cash flows independent of tax. Certain factors-duration, taxes paid, or an exit route-are not alone sufficient to establish substance, and the Bill omits a prior explicit definition of accommodating party, potentially creating interpretive uncertainty.