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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 South Carolina, as in other states, there are legitimate tax shelters that offer tax benefits to investors, which are legal and recognized under both federal and state tax laws. These can include investments in retirement accounts, real estate, municipal bonds, and certain business ventures that provide tax deductions or credits. However, abusive tax shelters are illegal. These are typically complex financial transactions that lack a genuine economic purpose other than to reduce taxes owed. The Internal Revenue Service (IRS) and South Carolina's Department of Revenue do not recognize abusive tax shelters and engaging in such schemes can lead to severe consequences including interest charges, penalties, and the possibility of criminal prosecution for tax evasion or fraud. Taxpayers in South Carolina are advised to be cautious of any investment schemes that promise tax benefits that seem too good to be true and to consult with a tax attorney or a certified tax advisor when in doubt about the legitimacy of a tax shelter.

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Taxes

tax shelter

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Taxes

tax shelter

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