Financial Alchemy: How Tax Shelter Promoters Use Financial Products to Bedevil the IRS (and How the IRS Helps Them)

81 Pages Posted: 6 Feb 2013  

Del Wright Jr.

Valparaiso University Law School

Multiple version iconThere are 2 versions of this paper

Date Written: February 2013

Abstract

People often question why tax shelters proliferate and why it is so difficult for the government to stop them. This Article explains, through examples, how tax shelters are structured to be a no-lose proposition for wealthy taxpayers. In a manner accessible to non-finance people, the Article sets forth the legal and financial tools underlying modern tax shelters and sheds light on how those tools are used to create technical tax shelters; i.e., tax shelters that work from an often hyper-technical tax perspective but are contrary to any reasonable legislative purpose. The Article then goes on to detail some of the most costly tax shelters in history, including Son of Boss, which the government estimates has cost taxpayers over $6 billion since the mid-1990s. The Article further explains how many shelters, including Son of Boss, evolved from a ninety-year-old tax avoidance technique called short-against-the-box. The Article concludes with a prescription, informed by ten years' experience in the tax shelter industry, for combating tax shelters.

Suggested Citation

Wright Jr., Del, Financial Alchemy: How Tax Shelter Promoters Use Financial Products to Bedevil the IRS (and How the IRS Helps Them) (February 2013). Arizona State Law Journal, Forthcoming; Valparaiso University Legal Studies Research Paper No. 13-3. Available at SSRN: https://ssrn.com/abstract=2212588

Del Wright Jr. (Contact Author)

Valparaiso University Law School ( email )

656 S. Greenwich St.
Valparaiso, IN 46383-6493
United States

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