Abusive Tax Shelter

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Definition: Abusive Tax Shelter

Abusive Tax Shelter

Quick Summary of Abusive Tax Shelter

Abusive Tax Shelter is an investment scheme that claims to reduce income tax without changing the value of the user’s income or assets

Video Guide For Abusive Tax Shelter

What is the dictionary definition of Abusive Tax Shelter?

Dictionary Definition

In the USA, this is a financial arrangement (often involving complex transactions through a trust or partnership) that aims to reduces an entities liability to tax and is judged to serve no legitimate business purpose beyond this.

The Internal Revenue Service (IRS) frequently publishes a list of transactions that are considered abusive; any taxpayer who makes use of such an arrangement; or one that resembles it; may be charged back taxes plus interest.

In the UK, the General Anti-Abuse rules similarly aim to outlaw “artificial and abusive” tax shelters.

Full Definition of Abusive Tax Shelter

An abusive tax shelter is a type of investment arrangement that claims tax deductions that the IRS considers to be illegal. These shelters may engage in a variety of activities, including inflated appraisals, nonrecourse loan losses, mischaracterization of transaction substance, mismatched income and deductions, unrealistic allocations, and unusual financing techniques. Invested funds are typically routed through partnerships or trusts under these arrangements. An abusive tax shelter serves no economic purpose; it exists solely to reduce investors’ income taxes.

Investors are liable for back taxes, penalties, and interest charges if this type of arrangement is declared illegal.

Cite Term

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Page URL
Modern Language Association (MLA):
Abusive Tax Shelter. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
May 20, 2024 https://payrollheaven.com/define/abusive-tax-shelter/.
Chicago Manual of Style (CMS):
Abusive Tax Shelter. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
https://payrollheaven.com/define/abusive-tax-shelter/ (accessed: May 20, 2024).
American Psychological Association (APA):
Abusive Tax Shelter. PayrollHeaven.com. Retrieved May 20, 2024
, from PayrollHeaven.com website: https://payrollheaven.com/define/abusive-tax-shelter/

Definition Sources

Definitions for Abusive Tax Shelter are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 13th April, 2022 | 0 Views.