Step 4-6

Tax Court Response

Approximately one-third of the Tax Court's total pending caseload relates to abusive tax shelters. These cases represent over $1 billion in proposed tax assessments. The Tax Court is concerned about the proliferation of tax shelters and has taken a tough stand by consistently denying claimed tax deductions that are based on nothing more than illusory obligations, paper transactions, and fraudulent schemes with no economic substance.

The IRS has prevailed in every Tax Court case involving tax shelters, including every kind of scheme, from movies, cattle, commodities, and charitable contributions, to computer leasing, master recordings, real estate, oil and gas.

In many instances IRS attorneys don't even have to try the case. The court will dispose of them by motions alone. In the majority of opinions, the Tax Court has denied virtually all of the claimed deductions, denying the taxpayers even the recovery of their full out-of-pocket or cash expenditures. The Tax Court has made it very clear that even out-of-pocket costs will not be allowed when the shelter transaction lacks economic substance.

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© 1986, 1998 to 2002, Jack Warren Wade, Jr.