Abusive Tax Shelter
What is an Abusive Tax Shelter?
An abusive Tax Shelter is an investment system through which a taxpayer tries to get tax benefits. Abusive Tax Shelter is illegal according to the IRS. This Abusive Tax Shelter tries to lower taxes to the federal or state without lowering the assets. The taxpayers always try to make some complex transactions and make abusive tax shelters mixed with legitimate tax shelters.
When a person is found taking these abusive tax shelters, will be subject to back tax, penalties, and interest charges.
Reporting of Transactions and Tax Shelters
IRS required all businesses to report certain types of transactions. There are five types of transactions that must be listed according to the IRS via form 8886. The transactions are listed transactions, confidential, contractual protection, loss transactions, and transactions of interest.