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tax shelter

Investments that yield tax benefits are sometimes called tax shelters and can be legal under federal and state laws. But abusive tax shelters are schemes involving transactions with little or no substance that are not recognized by federal and state taxing authorities and that may create taxpayer liability for interest, penalties, and possible criminal prosecution.

In Minnesota, as in other states, there are legitimate tax shelters that offer tax benefits to investors, such as retirement accounts, municipal bonds, and certain real estate investments. These are legal and recognized by both federal and state tax authorities. However, abusive tax shelters are a different matter. They typically involve complex transactions designed primarily to reduce taxes in ways not intended by the law. While they may appear to be legal investments, they lack substantial economic purpose other than tax avoidance. The Internal Revenue Service (IRS) and the Minnesota Department of Revenue scrutinize these transactions closely. Participants in abusive tax shelters can face substantial penalties, interest on unpaid taxes, and possibly criminal charges. It's important for taxpayers to ensure that any tax shelter they consider is legitimate and complies with both federal and state tax laws.

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Taxes

tax shelter

As a LegalFix Member You Will Be an Important Client of Local Law Firms

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Minnesota State Code

Taxes

tax shelter

Minnesota State Code

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