The massive federal health care reform legislation adopted in March, 2010 includes as a buried hazard, the first-time codification of the “economic substance doctrine”, as developed by the Internal Revenue Service and court cases in determining whether a tax shelter or tax motivated transaction has sufficient “economic substance” or economic reality apart from its tax consequences. The new codification is more stringent than many practitioners understood previous court cases to mean, and states that a transaction shall be treated as having economic substance “only if … the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position, and … the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.” New, automatic penalties will apply to disqualified transactions, regardless of actual fault or intent. The new economic substance test does not apply, however, to individual personal transactions which are not part of a trade, business or for-profit activity. (See new Internal Revenue Code § 7701(o), as adopted by the Health Care Reconciliation Act, P.L. 111-148, §1409, March 23, 2010).