If you run an accounting firm, law practice, tax advisory business, or financial services company, the IRS has a powerful principle it can use to challenge your business decisions: the economic substance doctrine. Unlike offshore jurisdictions that focus on physical presence and local staff, the US applies this doctrine to your transactions—questioning whether your deal structure had a genuine business purpose beyond saving taxes.
For licensed professionals especially, substance violations carry unique risks: not just IRS penalties, but potential review by your state licensing board, client lawsuits, and damage to your professional reputation.
What Is the Economic Substance Doctrine? Core Definition
Economic substance is an IRS doctrine asserting that tax law looks to the substance of a transaction, not merely its form. In plain language: you cannot use a creative legal structure to manufacture a tax benefit if the underlying business reality doesn’t support it.
The doctrine rests on a principle older than the modern tax code: Gregory v. Helvering, a 1935 Supreme Court case where a company reorganized purely for tax advantage, with no business reason. The Court disallowed the tax benefit because the substance—what actually happened—didn’t match the intended tax form.
Today, the IRS uses this doctrine to challenge:
- Artificial loss transactions — deals structured to generate losses without real economic risk
- Transfer pricing schemes — inflated intercompany charges that shift profits to low-tax entities
- Hybrid instruments — debt that looks like equity (or vice versa) to manipulate deductions
- Related-party transactions — sales, loans, or service agreements between connected parties at non-arm’s length prices
Why it matters for licensed companies: If you advise clients on these structures—or use them yourself—you’re in the IRS’s crosshairs. Tax practitioners, accountants, and attorneys are held to a higher standard because they should know better.
Why Economic Substance Rules Exist in the US
The economic substance doctrine wasn’t always as strict as it is today. The real tightening came after the tax shelter crisis of the 1990s–2000s.
Historical Context: In the early 2000s, aggressive tax shelters became big business. Accounting and law firms marketed exotic strategies to wealthy clients and corporations—deals with names like “Son of BOSS” and “COLI” (corporate-owned life insurance). These shelters promised enormous deductions with minimal real-world risk. The IRS was losing revenue, and Congress got involved.
The Tax Reform Act of 1984 first codified substance doctrine in the tax code. But it wasn’t until the American Jobs Creation Act of 2004 and subsequent regulations (Treasury Regulation § 1.701-2) that the IRS got real teeth to challenge these structures.
Why licensed companies face heightened scrutiny:
- Advisors and practitioners who market or recommend substance-lacking strategies face penalties for promoting abusive tax positions under IRC § 6694 (tax return preparers) and § 6701 (promoters of abusive shelters)
- State licensing boards view substance violations as ethical failures—grounds for discipline or license suspension
- Clients who rely on bad advice sue their advisors for malpractice, pointing to IRS challenges as evidence of negligence
How the US doctrine differs from offshore “substance” rules: Offshore jurisdictions (BVI, Cayman, Isle of Man) have regulatory substance requirements: you must maintain a physical office, hire local staff, and show CIGA (core income-generating activities) on the island. These are presence-based tests.
The US doctrine is transactional and purpose-based. The IRS doesn’t care if you have an office in Delaware or an overseas entity. It asks: “Did this deal have a real business reason, and does it make economic sense?” That’s a fundamentally different inquiry.
The Economic Substance Test Two-Part Analysis Explained
The IRS applies a two-part test codified in IRC § 7701(o) and the Treasury Regulations. Both parts must be satisfied; if either fails, the transaction lacks substance.
Part 1: Business Purpose Test (Subjective)
The question: Did the transaction have a genuine business purpose—a business reason other than tax avoidance?
A genuine business purpose means the transaction is motivated by a business or personal economic objective that’s independent of tax consequences. Examples:
- A real estate investor buys a rental property to generate rental income.
- A software company restructures to consolidate operations and reduce overhead.
- A partnership takes on debt to fund equipment purchase for actual expansion.
What doesn’t count as legitimate business purpose:
- “We wanted to reduce our tax bill”
- “Our tax advisor said this was efficient”
- “Other companies do this for tax savings”
These are proxies for tax avoidance, not genuine business reasons.
The burden is on you: If the IRS challenges, you must produce contemporaneous documentation—emails, board minutes, business plans—showing the business purpose existed before the transaction was structured. Post-hoc justifications are weak.
Part 2: Economic Effect Test (Objective)
The question: Apart from tax benefits, does the transaction have a reasonable prospect of profit or economic gain?
This is where “profits in excess of tax benefits” enters the analysis. You must show that the deal makes economic sense on its own—that you’d reasonably expect to profit even if the tax deduction or benefit disappeared.
Hypothetical: A partnership buys equipment for $100,000 and claims a $80,000 tax loss in Year 1. The IRS asks: “If there were no tax loss, would this deal still make sense?” If the answer is no—if you only did it for the loss—then there’s no economic effect. The transaction lacks substance.
Real-world scenario: A licensed tax advisor sets up a client in a “loan structure” where the client lends money to a partnership that invests it, borrowing the same amount at a higher rate. The net interest spread is negative (a loss), but the client gets a big tax deduction. Absent any other business reason (like developing a relationship or entering a new line of business), this fails the economic effect test. The only “profit” is the tax saving—not an economic effect in the legal sense.
Applying Both Parts: The Framing
Courts and the IRS apply these tests in sequence:
- Is there genuine business purpose? (Yes/No)
- Is there an economic effect? (Yes/No)
If both are “yes,” the transaction typically survives. If either is “no,” the IRS can disallow the tax benefit and impose penalties.
A helpful framework (original):
| Scenario | Business Purpose? | Economic Effect? | Survives ES Doctrine? |
| Rental property acquisition (real income expected) | Yes | Yes | Yes |
| Partnership equipment purchase for legitimate expansion | Yes | Yes | Yes |
| Artificial loss transaction (no biz reason, negative cash flow) | No | No | No |
| Debt restructuring to shift profits to low-tax entity (only benefit: tax) | No | No | No |
| Intercompany loan at non-arm’s length rate (related parties, no real business reason) | No | No | No |
| Real estate deal with modest tax benefit and genuine rental expectation | Yes | Yes | Yes |
Who Must Comply? Licensed Companies & Sectors
The economic substance doctrine technically applies to all taxpayers. But certain industries and professionals face heightened IRS scrutiny:
Tax & Accounting Professionals
- CPA firms — especially those with tax practices advising on aggressive structures
- Tax advisory boutiques — firms specializing in planning and strategy
- Enrolled agents — individuals authorized to represent clients before the IRS
- Bookkeeping services — when they design or recommend transaction structures
Why the spotlight: Practitioners who recommend or implement substance-lacking transactions face preparer penalties (IRC § 6694). This creates pressure to document and defend every recommendation.
Law Firms
- Tax law departments — attorneys advising on M&A, restructuring, or aggressive tax planning
- Transactional practices — lawyers structuring deals (real estate, partnerships, LLC formations)
- Real estate law — especially FIRPTA (Foreign Investment in Real Property Tax Act) compliance
Why the spotlight: Attorneys face professional responsibility rules (ABA Model Rules § 8.4) prohibiting assistance with tax evasion. A substance-lacking recommendation could trigger disciplinary review.
Financial Services & Wealth Management
- Investment advisors — especially those structuring investment partnerships or hedge funds
- Wealth managers — recommending entity structures for client portfolios
- Fund managers — managing investment funds with complex tax structures
Why the spotlight: The IRS and SEC both scrutinize fund structures for artificial loss positions and fee arrangements that lack economic substance.
Real Estate Investors & Operators
- Commercial real estate firms — especially those using FIRPTA planning or foreign ownership structures
- Real estate development — partnerships and syndications with complex capital structures
- REITs and property management — when claiming intercompany expense arrangements
Why the spotlight: Real estate offers many genuine business opportunities and numerous tax-driven schemes. The IRS has separate guidance on real estate substance (see IRS Notice 2006-108 on tax avoidance transactions).
Economic Substance in Transfer Pricing: The Multinational Angle
If your licensed company has multinational operations or advises multinational clients, you’re facing a combined test: both the substance doctrine and transfer pricing regulations.
What’s Transfer Pricing?
Transfer pricing is the price charged between related entities in different countries for goods, services, or intangible property. IRC § 482 requires that these prices be “arm’s length”—the same price unrelated parties would negotiate.
Why substance matters here: If you set up an intercompany arrangement (e.g., a parent company pays a subsidiary for management services, or loans money at a fixed rate), the IRS asks two questions:
- Substance: Is there a genuine business reason for this arrangement, and is there economic profit independent of tax savings?
- Transfer Pricing: Is the price arm’s length?
Fail on substance, and the entire arrangement can be disallowed—regardless of whether your transfer price was reasonable.
Real-world scenario:
A US accounting firm establishes an offshore subsidiary in the Cayman Islands to manage client accounts. The Cayman entity is supposed to earn profits from managing investments. But in reality:
- No Cayman staff performs actual work; the US firm does everything
- The Cayman entity has no real clients; it just holds money
- The profit allocation is purely tax-driven (shifting income to Cayman’s 0% rate)
The IRS sees this as:
- Failed substance test: No genuine business reason for the Cayman entity; no economic profit independent of tax benefit
- Failed transfer pricing: The “management fee” charged to the US entity isn’t arm’s length because the Cayman entity isn’t performing real services
Result: The IRS reallocates income to the US firm, applies penalties, and the firm faces potential preparer penalties for recommending it.
FIRPTA & Economic Substance: Foreign Investment in US Real Estate
FIRPTA (Foreign Investment in Real Property Tax Act) is a separate but related area where substance matters.
Quick background: FIRPTA requires foreign persons who sell US real property to withhold and pay tax. Exceptions exist for qualified entities (e.g., foreign corporations that are “real property trade or business” corporations).
The substance angle: If a foreign investor buys US real estate through a shell entity claiming FIRPTA relief, the IRS may challenge whether the structure has economic substance. For example:
- Foreign investor creates a Delaware C-corporation to hold US land
- Claims the corporation qualifies for FIRPTA relief based on business activities
- But the corporation has no real employees, no actual business—just holds the land
Substance test: Did the investor create the entity for a genuine business reason (asset management, liability protection, operational control), or purely to avoid FIRPTA withholding? If purely for tax benefit, substance fails, FIRPTA relief is disallowed, and withholding is triggered.
Licensed firms advising on FIRPTA: You need to document legitimate business purposes for any entity structure you recommend. Withholding avoidance alone isn’t sufficient.
How the IRS Tests Economic Substance: Audit Red Flags
If the IRS opens an audit involving economic substance, here’s what examiners look for:
Red Flag #1: Disproportionate Tax Benefits
Indicator: The tax deduction or loss is large relative to the cash invested or economic benefit realized.
Example: A partnership generates a $500,000 tax loss but the partners invest only $50,000 in capital and receive minimal economic profit. Red flag for artificial loss.
What to show: Contemporaneous documentation that the transaction was motivated by genuine business purpose, not the outsized tax benefit. Board minutes, emails, business projections showing expected profit independent of tax consequences.
Red Flag #2: Related-Party Transactions Without Arm’s Length Documentation
Indicator: You paid a related party for services or goods, or lent money to a related party, without transfer pricing documentation.
Example: A parent company charges its subsidiary an unusually high management fee; the subsidiary pays without objection because they’re controlled by the same owner.
What to show: Transfer pricing documentation (functional analysis, comparable data, economic analysis) proving the price is arm’s length. If you can’t produce it, the burden shifts to you to prove substance and pricing were legitimate.
Red Flag #3: Lack of Contemporaneous Documentation
Indicator: No business plan, board minutes, or written analysis explaining the business purpose.
Example: An auditor asks, “Why did you structure this deal this way?” and the only response is, “Our tax advisor recommended it.”
What to show: Emails, board minutes, business plans, internal memos—all created before the transaction—explaining the business objective. Post-hoc justifications created during audit are weak evidence.
Red Flag #4: Participation by Promoters or Tax Shelter Marketers
Indicator: A third party (accountant, tax firm, financial advisor) marketed or promoted the structure to multiple clients.
Example: A CPA firm sells a standardized “strategy” promising 30% tax savings to dozens of clients with similar fact patterns.
What to show: If you recommended it, evidence that you independently analyzed the client’s situation and concluded the structure was appropriate—not just that it’s a packaged product. Failure here exposes you to prepare penalties under IRC § 6694.
Red Flag #5: Absence of Economic Activity or Profit
Indicator: The entity or transaction generates no cash flow, no profit, and no identifiable business activity.
Example: A partnership claims capital losses and tax deductions, but never engages in any investment activity or business operation.
What to show: Real business activities, actual investments, real expected profit or income—independent of tax consequences. Without this, the transaction is substance-free.
Penalties for Economic Substance Violations
Violating the economic substance doctrine carries multiple layers of risk:
Layer 1: Tax Deficiency + Interest
If the IRS disallows the deduction or benefit, you owe the unpaid tax, plus interest (currently ~8% annually).
Impact: A $100,000 loss disallowance = $37,000 tax owed (at 37% marginal rate) + years of interest.
Layer 2: Accuracy-Related Penalty
IRC § 6662 imposes a 20% penalty on the underpayment attributable to substantial understatement of tax or accuracy-related issues.
Impact: An additional $7,400 (20% of $37,000) on top of the tax and interest.
Layer 3: Substantial Overstatement of Pension Liabilities or Tax Shelters Penalty
If the overstatement is especially egregious (related to a “tax shelter”), the penalty can rise to 40%.
Layer 4: Preparer Penalties (For Advisors)
If you recommended or implemented the structure, you face:
- IRC § 6694(a): Penalty of $1,000 (or 50% of the fee you charged) for understatement of tax due to an unreasonable position
- IRC § 6694(b): Penalty of $5,000 (or 75% of the fee) for “willful or reckless” conduct
These are levied on you, not the client. And they can exceed your fees.
Layer 5: Licensing Board Review
State licensing boards (CPA, attorney, enrolled agent) can discipline you for unethical conduct, which includes recommending tax positions lacking reasonable basis.
Impact: Suspension or revocation of license—ending your career in that profession.
Layer 6: Client Lawsuits
Clients who rely on your substance-lacking advice and get audited will sue you for malpractice, claiming you failed to meet the standard of care.
Impact: Defense costs, settlement, or judgment—potentially six figures.
Real Penalty Range Summary
| Situation | Typical Outcome |
| Individual with artificial loss, corrected in audit | Tax + 20% interest penalty; preparer (if applicable) faces $1,000–$5,000 |
| CPA firm recommends structure to multiple clients; IRS challenges all | Each client audit = tax + penalties; firm faces § 6694 penalties per return + potential licensing discipline |
| Tax attorney structures deal lacking substance; client loses in Tax Court | Attorney pays malpractice judgment + potential bar discipline |
| Promoter of tax shelter strategy; marketed to 100+ clients | Promoter penalties (IRC § 6701) up to $1,000 per client; potential criminal referral if fraud involved |
How Licensed Companies Can Document & Comply
Documentation is your defense. If audited, the burden falls on you to prove substance. Here’s the checklist:
1. Business Purpose Documentation
Create before the transaction (contemporaneous):
- Board minutes or partner resolution — explicitly stating the business objective
- Written business plan — explaining the expected business benefit
- Email trail — showing internal discussion of the business rationale (not just the tax benefit)
- Third-party analysis — if applicable (e.g., valuation, market study)
What NOT to document:
- “Tax savings” as the primary purpose
- References to tax benefits in business materials
- Language suggesting the deal wouldn’t happen without the tax benefit
2. Economic Effect Documentation
Prove profit independent of tax:
- Financial projections — showing expected cash flow and profit (discounting the tax benefit)
- Comparative analysis — showing the deal makes sense even without the tax deduction
- Risk analysis — acknowledging downside scenarios and still concluding the deal is reasonable
- Pricing/rate justification — for intercompany transactions, transfer pricing documentation
Red flags to avoid:
- “The deal only makes sense for tax savings”
- “Without this deduction, the return is negative”
- No independent profit analysis
3. Related-Party Transaction Documentation
If your transaction involves related parties:
- Transfer pricing study — functional analysis, comparables, arm’s length pricing
- Board approval — decision-making that’s arms’ length (independent review, no control by interested party)
- Written contract — terms at least as favorable to your entity as an unrelated party would negotiate
4. Professional Qualification Documentation
If the transaction involves services or management:
- Employee records — staff performing work, hours logged, qualifications
- Service descriptions — what work is actually performed, when, by whom
- Invoice documentation — charges match work performed
- Approval records — client or management review of work before paying
5. Contemporaneous vs. Post-Audit Documentation
Contemporaneous (strong): Documents created before the transaction closes, showing you analyzed the business rationale at the time.
Post-audit (weak): Documents created during an audit, explaining the business purpose retrospectively. The IRS views these skeptically—you’re constructing a narrative to defend, not recording actual decision-making.
Pro tip: Establish a documentation protocol. Before closing any significant transaction, require a memo or board resolution explicitly addressing:
- Genuine business purpose (not tax-driven)
- Expected economic profit independent of tax benefit
- Why you chose this structure vs. alternatives
- Risk factors and how they were mitigated
6. Outsourcing & Control
If you outsource functions:
- Written agreement — clearly defining roles, responsibilities, independence
- Oversight documentation — emails or memos showing you retained control and reviewed outputs
- Performance management — records showing you supervised or audited work
- Assumption of liability — contracts making clear you’re responsible for results
The rule: You can outsource work, but you can’t outsource supervision. If the IRS challenges, you must show you retained control and verified the work was done correctly.
State-Level Economic Substance Requirements for Licensed Companies
Most ES doctrine is federal (IRS-driven), but some states have added their own rules:
California
California Franchise Tax Board (CFTB) has adopted similar substance-over-form doctrine for state tax purposes. Any transaction that fails the federal ES test likely fails California’s version as well. Professionals advising California-source income must apply the same rigor.
New York
New York State tax regulations incorporate federal substance doctrine for state income tax purposes. Additionally, New York has been aggressive on partnership audit adjustments, often using substance arguments to disallow claimed losses or basis step-ups.
Delaware
While Delaware corporate law is permissive on structuring, Delaware income tax (for entities organized there) applies federal substance principles. Additionally, state licensing boards (accountants, attorneys) apply professional responsibility standards that often incorporate federal ES doctrine.
Professional Licensing Boards
More important than state tax rules: State licensing boards (accountant boards, bar associations, CFP boards) have disciplinary standards tied to federal tax positions. Recommending an ES-lacking position can trigger professional discipline regardless of state tax specifics.
Takeaway: If your practice has multistate clients, assume federal ES doctrine applies and audit accordingly. Document the business purpose and economic effect regardless of which state is involved.
Case Studies Real Economic Substance Failures (And Wins)
Case Study 1: The Partnership Loss Shelter (Illustrative Scenario)
The setup: A wealthy individual invested $500,000 in a partnership marketed as an “oil and gas opportunity.” The partnership was supposed to purchase oil leases and generate production revenue. However, in Year 1, the partnership claimed a $2 million tax loss, allocated to partners.
The red flags:
- The loss was 4x the capital invested
- Expected cash flow was minimal or negative
- The primary marketing pitch was tax savings, not investment opportunity
- Multiple identical structures were marketed to dozens of clients
The IRS response:
- Audited the partnership and several partners
- Disallowed the loss entirely on substance doctrine grounds
- Determined there was no genuine business purpose (investment wasn’t real; tax benefit was the sole driver)
- Imposed 40% penalty on partners
- Referred the promoter to Criminal Investigation
The lesson: If the loss looks disproportionate to the risk and capital, the IRS will assume it’s artificial. Document genuine economic expectation and real business risk, or the position is indefensible.
Case Study 2: The Intercompany Loan at Non-Arm’s Length Rate (Illustrative)
The setup: A US corporation lent $10 million to its wholly owned subsidiary in a low-tax jurisdiction at 2% interest. Market rates for such loans were 6–8%. The subsidiary’s business model didn’t justify the lower rate.
The red flags:
- Rate was well below comparable transactions
- No business reason for the below-market concession
- The primary benefit was profit-shifting to the low-tax entity
The IRS response:
- Applied IRC § 482 to reallocate interest
- Reclassified the “loan” as a capital contribution (no interest deduction)
- Adjusted the parent’s deduction from 2% to 6% (the arm’s length rate)
- Applied preparer penalties to the advisor who recommended the structure without transfer pricing documentation
The lesson: Related-party transactions require transfer pricing analysis and documentation. Rates must be defensible based on independent comparables and function analysis. Tax savings alone don’t justify below-market terms.
Case Study 3: The Professional Service Entity With No Real Staff (Illustrative)
The setup: A tax CPA formed an LLC to provide “consulting services” and charged consulting fees to clients. However, the LLC had no employees, no offices, and the CPA performed all work through their own corporation. The LLC was purely a pass-through for tax purposes.
The red flags:
- No substance: no staff, no office, no real operation
- Business purpose was unclear (tax efficiency was the driver)
- The LLC added no value and clients didn’t know they were “consulting with” the LLC vs. the CPA
The state board response:
- The state accounting board reviewed the structure as part of a licensing audit
- Determined the arrangement violated professional responsibility rules (misrepresenting who was performing services)
- Issued a disciplinary letter and required restructuring
The lesson: Even within the same practice, entity structures must have genuine business purpose and real operational substance. You can’t just layer entities for tax reasons without showing why each serves a business function.
Conclusion
The economic substance doctrine is the IRS’s most powerful tool for disallowing tax benefits you claim. For licensed companies—especially tax professionals, accountants, attorneys, and financial advisors—compliance means treating every transaction with rigor: documenting genuine business purpose, showing real economic profit independent of tax benefit, and keeping contemporaneous records that prove the deal was real.
FAQs
What’s the single biggest red flag the IRS looks for in substance audits?
Disproportionate tax benefits relative to cash invested or economic gain. If you invested $100,000 but claimed a $1 million loss, the IRS immediately questions whether the deal was real or manufactured. Always be prepared to show economic profit independent of the tax deduction.
Can you outsource core business activities under the substance doctrine?
Yes, with control and documentation. You can hire contractors or vendors to perform work, but you must retain supervision, responsibility, and verification. If you outsource entirely and have no control, the IRS may argue you lack real business activity. Document your oversight in writing (emails, memos, approval records).
How often must I update my substance documentation?
Annually. If the business circumstances change, you should update your analysis. If a transaction spans multiple years, update your business purpose and economic projections each year. This shows you’re continuously evaluating the deal on business merit, not just coasting on initial tax assumptions.
Is there a difference between “economic substance doctrine” and “substance-over-form” principle?
No, they’re used interchangeably. Both refer to the same IRS principle: the substance (real-world effect) of a transaction controls its form (how it’s legally structured). The doctrine was formally codified in IRC § 7701(o), but courts have applied the principle for decades.
What’s the difference between the US substance doctrine and offshore “economic substance” requirements?
US doctrine is transactional: The IRS asks, “Is this deal real and does it make business sense?” It focuses on the purpose and effect of the transaction.
Offshore requirements are operational: Regulators ask, “Is your entity really operating in this jurisdiction?” They focus on physical presence, staff, and local activity.
A transaction can pass US substance but fail offshore presence, and vice versa. Multinational licensed firms must satisfy both tests.
Can you fix a failed substance retroactively—after an audit starts?
Practically speaking, no. Once the IRS opens a substance audit, retrofitting documentation is nearly impossible. Any new materials created during the audit are viewed as defensive and self-serving. Your only defense is documentation created before the transaction. Prevention is vastly better than remediation.
Are holding companies treated differently under the substance doctrine?
Holding companies often face higher scrutiny because their sole purpose might appear to be tax-driven (aggregating income at the holding company level, deferring distribution). To defend a holding company structure, document legitimate business purposes: consolidated accounting, centralized cash management, liability segregation between business lines, or operational consolidation that reduces overhead.
What’s the statute of limitations for the IRS to challenge substance?
Generally 3 years from the filing date. However, if the IRS determines there’s a “substantial understatement” of tax (exceeding $10,000 for most taxpayers), the period extends to 6 years. And if fraud is involved, there’s no statute of limitations.
For licensed professionals facing preparer penalties under § 6694, the lookback can be even longer if the IRS initiates a comprehensive examination of your practice.
Do business entity types (LLC, S-corp, C-corp, partnership) change the substance analysis?
No. The substance doctrine applies regardless of entity type. An artificially structured LLC fails substance just like an artificially structured partnership. The entity form doesn’t cure a lack of genuine business purpose. However, certain entity types (e.g., partnerships, S-corps) face heightened audit scrutiny because they offer flow-through taxation, which amplifies the tax benefit and thus the IRS’s motivation to challenge.
Can I rely on a tax advisor’s opinion that a transaction has economic substance?
Partially. A well-reasoned written opinion from a qualified advisor (CPA, attorney) can support your position, especially if you reasonably relied on it. However, this is not a “get out of jail free” card. The IRS can still challenge, and you remain ultimately responsible. This is why it’s critical to ensure your advisor’s analysis is thorough and independent—not just a rubber-stamp for a predetermined structure.
