The majority of tax shelters are in full compliance with the tax laws, but an increasing number of these shelters have crossed the boundaries whereas they are being viewed as illegal, abusive tax shelters. So what’s the difference between a true business loss and a tax shelter loss? The substance of the event that gives rise to the loss is the key element which distinguishes a tax shelter loss from a true business loss.

Three elements are usually found in tax shelters, either separately or in combination.

• Leverage is obtained through various financing arrangements.
• Taxes are deferred to later years.
• Ordinary gains (100% taxable) are converted to capital gains (40% taxable), or capital Read More