Determining whether or not a transaction has economic substance is a fact-intensive inquiry that is dependent upon the facts and circumstances of each transaction made by a taxpayer. The Secretary shall consider or analyze all the facts and circumstances including the following:

1. (1) The reasons for the transaction;
2. (2) Whether the transaction was a reasonable means to accomplish the asserted purposes;
3. (3) Expectations of benefits obtained from the transactions;
4. (4) The effects the transaction had on the taxpayer's profits;
5. (5) The existence of a reasonable or realistic potential for profit from making the transaction;
6. (6) The objective economic impact of the transaction other than State income tax savings;
7. (7) The transaction's effect on the taxpayer's State income tax liability;
8. (8) The transaction's effect on the taxpayer's tax liability in other states;
9. (9) The transaction's effect on the taxpayer's federal tax liability;
10. (10) Whether the method of determining the amount of payment is an industry practice;
11. (11) The change in the business operations of the parties, if any, after the transaction;
12. (12) Whether assets were transferred between or among related parties;
13. (13) Whether the business operations related to specific assets changed after any transfer of those assets;
14. (14) Whether the entity transferring assets retained control over the assets;
15. (15) The tax consequences of the transfer of assets;
16. (16) The party or parties who created or developed the ideas which led to the transaction;
17. (17) The party or parties who presented the ideas concerning the transaction to the taxpayer;
18. (18) Whether the contemporaneous documentation explaining the transaction to the taxpayer discussed profit potential in addition to tax benefits;
19. (19) The party or parties that drafted the agreements relating to the transaction;
20. (20) The party or parties that negotiated the agreements relating to the transaction;
21. (21) The party or parties that dictated the terms of the agreements relating to the transaction;
22. (22) Cost-benefit analyses or other studies conducted related to the transaction;
23. (23) Non-tax benefits obtained by the taxpayer as a result of the transaction; and
24. (24) Whether the intercompany transaction resulted in a circular cash flow.

History Note: Authority G.S. 105-130.5A; 105-262.1;
Eff. January 31, 2013;
Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.