Transactions without economic substance.

If any person, directly or indirectly, engages in a transaction or series of transactions without economic substance to create a loss or to reduce taxable income or to increase credits allowed in determining Wisconsin tax, the department shall determine the amount of a taxpayer’s taxable income or tax so as to reflect what would have been the taxpayer’s taxable income or tax if not for the transaction or transactions without economic substance causing the reduction in taxable income or tax.

A transaction has economic substance only if the transaction is treated as having economic substance as determined under section 7701 (o) of the Internal Revenue Code, except that the tax effect shall be determined using federal, state, local, or foreign taxes, rather than only the federal income tax effect.

With respect to a transaction between members of a controlled group, as defined in section 267 (f) (1) of the Internal Revenue Code, the transaction shall be presumed to lack economic substance, and the taxpayer shall bear the burden of establishing by clear and satisfactory evidence that the transaction or the series of transactions between the taxpayer and one or more members of the controlled group has economic substance.