sham transaction

A sham transaction is a transaction that is either illusory or lacks genuine substance or legal effect, despite appearing valid on paper. Courts may disregard or void such transactions when they are used to deceive, evade taxes, or manipulate legal outcomes. Sham transactions typically have no real economic consequences and are often designed to create the illusion of compliance with legal or financial obligations.

[Last reviewed in June of 2025 by the Wex Definitions Team]

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