Business Purpose Test
/ˈbɪznəs ˈpɜrpəs tɛst/
Definitions
- (n.) A legal standard used to determine whether a transaction or arrangement has a legitimate business reason beyond mere tax avoidance or legal formality.
The court applied the business purpose test to ascertain if the corporate restructuring was motivated by genuine business reasons.
Forms
- business purpose test
Related terms
See also
Commentary
The business purpose test is often applied in tax law and corporate law to distinguish substantive commercial activity from transactions lacking genuine economic intent.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.