ADVERTISE ON THIS SITE!

Our sites have more than 100,000 visitors every month. Like our international site, this new US site will quickly grow to be one of the most-visited American tax sites.

If you want to advertise with us, be an exclusive launch partner for new US sections, or show our highly-rated news content on your own site, just e-mail paul@ustax
network.com.

We'll get right back to you! If you give us a number to call you, we'll do just that. For more information, click here.

Introduction A brief review of the place of tax shelters in the American tax landscape.

Tax Shelter Techniques The methods that are typically used in creating tax shelters.

Tax Shelter Techniques

There are many methods by which taxpayers shelter their losses, but these three characteristics are usually found in tax shelters, either separately or in combination:

• Taxes are deferred to later years;

• Ordinary gains (100 percent taxable) are converted to capital gains (only 40 percent taxable), or capital losses (only 50 percent deductible), are converted to ordinary losses (100 percent deductible); in both cases producing a lower tax liability;

• Leverage is obtained through various financing arrangements.

Deferral also occurs when excessive deductions are taken in the early years of a tax shelter, a practice the IRS calls "front end loading." Examples of illegal front end loading practices are:

• Deducting capital items by classifying them as advisory fees, management fees, or interest;

• Deducting prepaid interest;

• Not including prepaid income;

• Deducting excessive depreciation, amortization, or depletion by using the wrong method, too short a useful life; and/or too large a basis.

BACK TO TOP