Tax Shelter Case Study

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The topic of tax shelters is controversial to say the least. Tax sheltering is not an illegal act and can be performed with accordance to IRS rules. A tax shelter is a way where a tax payer reduces or defers their taxes. Some common tax sheltering can be 401(k), 529 savings plan, municipal bonds, and purchasing of real estate. (Fool.com) As long as the taxes are deferred or reduced reasonably as stated by the IRS, they are considered legal. However, the IRS does not allow for abusive tax shelter schemes. An example of abusive tax sheltering includes, deductions for excess life insurance in a section 412(i), S Corporation ESOP abuses, 401(k) accelerated deductions, and Abusive IRA transactions. (IRS.gov) The IRS maintains an abusive tax shelter hotline that can be contacted through email or mailing address. If found guilty of tax sheltering, the individual or promotor will …show more content…
She then created Averill Corp and then transferred the 1,000 shares of Monitor to Averill for a capital net gain of $76,007.88. She then treated the transaction as a tax free corporate organization under “a 'reorganization' under section 112(g) of the Revenue Act of 1928, c. 852, 45 Stat. 791, 816, 818, 26 USCA 2112(g), “(Caselaw.findlaw.com) The decision came from the supreme court of “ It is earnestly contended on behalf of the taxpayer that since every element required by the foregoing subdivision (B) is to be found in what was done, a statutory reorganization was effected; and that the motive of the taxpayer thereby to escape payment of a tax will not alter the result [293 U.S. 465, 469] or make unlawful what the statute allows.” (Caselaw.findlaw.com) Even though the individual acted without the counseling of a tax lawyer or accountant, her ambition to scheme in tax sheltering sparked a new interest that would continue

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come and teach the women professionalism, resume writing, interview skills, impromptu speaking, and so on, while allowing them to complete community service hours. By teaching them these key skills, they will be better prepared for life after the shelter. Lastly, we will attempt to provide services needed for women to survive and maintain a normal life in society. We will assist with counseling services and partner with outside sources to find a solution to each individual's situation. These counseling…

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