Your business has matured, or your real estate has appreciated, time to cash out and sell. It has taken a long time, and since you have held your shares or real estate for greater than one year, the gain qualifies for long-term capital gain taxation. A 15% federal tax rate; not bad!
Yet, 15% of a $10,000,000 gain is $1,500,000. With a $20,000,000 gain it is $3,000,000. That is an awful lot of money.
Tax shelters have been a bad word since legislation was designed to eliminate what was considered abusive. From the sweeping language of the Tax Reform Act of 1986, Pub L. 99-514, tax shelters were, in essence, wiped out and became the equivalent of a 4-letter word in tax planning.
But are tax shelters really gone?
Haven’t there been cases where the IRS has alleged that certain devises are still abusive tax shelters?