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TOO GOOD TO BE TRUE?

September 11, 2008

The New York Times has a new piece on avoiding flaky tax shelters. It quotes this tax expert:

“Here are three warning signs that a tax deal should be avoided,” said Tanina Rostain, a legal ethics scholar at New York Law School: “When the tax savings promised are many times the amount of the initial investment, when you are told that there is no financial risk involved and when you are urged not to show it” to anyone else.

The piece includes much good advice, most notably to consult a tax advisor who's not trying to sell you the deal. But the piece only scratches the surface. Here are some tips to help you point out a really bad tax shelter.

- It's sold on the Midway at the State Fair.
- You ask the promoter if you will go to jail for it, and he says "oh, it's about you now?"
- The promoter offers to throw in a Pocket Fisherman.
- You have to buy the shelter using small unmarked bills.
- The advisor says "hey, it worked for Wesley Snipes!"

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