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The Oxford Introductions to U.S. LawIncome Tax Law$
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Edward McCaffery

Print publication date: 2012

Print ISBN-13: 9780195376715

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780195376715.001.0001

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A Summary, of Sorts

A Summary, of Sorts

Anatomy of a Tax Shelter

Chapter:
(p.181) Seven A Summary, of Sorts
Source:
The Oxford Introductions to U.S. Law
Author(s):

Edward J. McCaffery

Publisher:
Oxford University Press
DOI:10.1093/acprof:osobl/9780195376715.003.0007

This chapter briefly considers use of tax shelters in tax planning. With its capability of unlimited interest deduction, tax shelters became very useful for those wanting to pay lower taxes. However, these capabilities were prohibited by the Tax Reform Act of 1986 due to the threat it posed to the U.S. tax system. By using hypothetical situations and past landmark cases, this chapter also illustrates the process of tax sheltering using the four basic techniques: interest dodge, simple straddle, classic shelter, and the kiddie shift. It further examines the Tax Reform Act of 1986, identifying what it did and did not do and tackles the important question of whether the Internal Revenue Code is enough to prohibit illegal taxation abuse.

Keywords:   tax shelter, tax planning, unlimited interest deduction, Tax Reform Act 1986, US tax system, interest dodge, simple straddle, classic shelter, kiddie shift, Internal Revenue Code

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