Other Tax Issues of Interest
Tax Shelters

discount hotels in ValenciaA tax shelter is an investment that requires substantialinvestment with a degree of risk. Tax shelters are required to be registered andthe seller is required to maintain a list of the investors. The investors arerequired to report the tax shelter number on their tax return using Form 8271.

The amount of your deductions or losses from mostactivities is limited to the amount you have at risk.

baccarat strategieYou are considered at risk for an activity for thefollowing amounts:

• hotel room in HusavikThe amount of cash you invested in the activity
• The adjusted basis of other property you contributed to the activity, and
• hotels in BlackpoolThe amount you borrowed to invest in the activity, to the extent that you are personally liable on the loan or have pledged property not used in the activity as security.

Note: Losses and credits from tax shelters are oftenconsidered passive. Passive losses and credits can only be used to offset incomefrom other passive activities. They cannot be deducted from other income such aswages, salaries, professional fees, or portfolio income. The limitations arecomputed on Form 8582,Passive Activity Loss Limitations.

Abusive Tax Shelters

Abusive Tax Shelters are marketing schemes that involveartificial transactions with little or no economic foundation. Generally, youinvest money to make money. Abusive Tax Shelters offer:

• ERROR MSG Inflated tax savings based on large write-offs andcredits that are usually out of proportion to your investment.
• Little risk despite outward appearances.

For additional information, link to the following website: http://www.irs.gov/prod/tax_edu/teletax/tc454.html.

For more information on passive income and losses, referto Publication 925, PassiveActivity and At-Risk Rules.

For more information on tax shelters and investmentconsiderations, refer to Publication550,Chapter 2.

Important References

Form 8271
Form 8582

Web Link

http://www.irs.gov/prod/tax_edu/teletax/tc454.html