Re: "Hiding" capital gains

From: Rich Carreiro <rlcarr@animato.arlington.ma.us>
Subject: Re: "Hiding" capital gains
Date: Sat, 18 Dec 1999 16:09:01 -0500

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>
>I have a "happiness problem" -- humongous gains from ESO stock after IPO -- but
>I can't stand the idea of giving up 40% of it to taxes.  A financial advisor
>has just suggested I bury it in Oil Exploration/Drilling, with an outfit that
>has a good track record, so that almost all of it it a tax deduction which is
>never recovered.  Too good to be true?  More complex than I understand?

You really need to be careful with these.

First, with the change in tax laws in 1986 and the institution of the
"passive income" and "passive loss" rules, much of the utility of 
those types of tax shelters disappeared.

Second, many of these things are just out-and-out scams.

Third, not only are some of them scams, but some of them are so-called
"abusive tax shelters" and may well get you in trouble with the IRS
if you get involved with them.

Fourth, they can be very complicated.

My recommendations are, FWIW:
* Demand that your advisor disclose what sort of commissions that you would
  be paying him to get into this thing and also demand that he tell you what
  (if any) remuneration he is receiving from the tax shelter outfit.

* Consult with a tax professional (preferably an EA or a CPA who primarily
  does taxes (as opposed to one who primarily does bookkeeping/accounting)
  and have them do some research on the specific tax shelter outfit your
  advisor is trying to sell you.

Rich Carreiro                            rlcarr@animato.arlington.ma.us

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