Tax Avoidance or Smart Investing?

What else can derivatives be blamed for?  OTC equity derivatives are now in the spotlight of the IRS for promoting tax avoidance.  The theory is that an equity swap allows the purchaser to collect dividends on the “swapped” stock without paying the taxes associated with actually owning that stock.  I can certainly see the merit in the IRS’s argument, but where do we draw the line between tax avoidance and smart investing?

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