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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 Tennessee, as in other states, there are legitimate tax shelters that can provide tax benefits to investors. These are typically investments in certain types of real estate, retirement plans, or other vehicles that are recognized by the Internal Revenue Service (IRS) and state tax authorities as valid for tax deductions or deferrals. However, abusive tax shelters are a different matter. These are schemes that lack economic substance or are designed solely to evade taxes, and they are not recognized by tax authorities. Engaging in abusive tax shelters can lead to severe consequences, including the imposition of interest and penalties. In some cases, participation in these schemes may result in criminal prosecution. Both federal and state laws apply to these activities, and the IRS actively pursues cases against abusive tax shelters. It's important for taxpayers to consult with an attorney or a tax advisor before entering into any investment that promises tax benefits to ensure that it complies with all applicable laws and regulations.

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Taxes

tax shelter

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Taxes

tax shelter

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