IRS Attacks On Tax Shelters Works

( The Tenth Circuit’s affirmation of the Tax Court’s decision in Preston Olsen may portend the return of an IRS strategy that was formerly effective in pursuing tax shelters. Often referred to as the “hobby loss” rule, Code Section 183 – Activities not engaged in for profit – describes non-profit activities. That makes sense because it appears to be used frequently against what would be considered hobbies.

But things haven’t always been like that. There are sixty perspectives on computer leasing and master recording that do not even remotely resemble hobbies. They served as tax havens. There was a specific carve-out in favor of affordable housing arrangements, which were more or less recognized tax shelters by Congress because the application of 183 to tax shelters was so obvious. The viewpoints waned, and for the past two decades, the hobby loss rule has been relevant to hobbies, which are defined primarily as pursuits that appear like they must be enjoyable when you are thirteen or older – such as boats, planes, horses, and even writing if you are nerdy. The Preston Olsen case then surfaced.

In the Tax Court ruling, Judge Lauber highlighted that more than 200 cases involving additional investors were on hold as they awaited the resolution of the Olsen case. The “Fresnel lenses”—similar to those used in lighthouses—that the investors in the scheme bought were intended to focus sunlight to boil liquids to generate power. In 2018, a Utah federal court issued R. To disgorge more than $50 million in gross profits from the fraudulent scheme involving bogus income tax deductions and solar energy credits, Gregory Shepard, Neldon Johnson, RaPower-3 LLC, and International Automated Systems, Inc.

The Olsens owed $95,572 in back taxes for 2011 through 2014. Because the agent failed to acquire timely supervisory clearance for the penalties, the IRS acknowledged accuracy-related disadvantages. Depreciation deductions and energy credits were the problems.

The promoters advertised a scheme to let investors “zero out their taxes” by purchasing glasses and claiming energy credits and depreciation deductions. Most of the lenses ended up just sitting in a warehouse because the technologies to generate power never functioned practically. Many of those lenses that were mounted on a tower were damaged.

As a result, the lenses were never actually put to use. They were financed in a way that had several fundamental problems. The Olsens didn’t participate in any way that would have met Section 469’s standards.

The Tax Court ruled in favor of taxpayers who bought lenses primarily to obtain tax advantages rather than to make a profit. The entity that held the lenses lacked significant business records, a separate bank account, and a marketing strategy.

Three years after stating that the “material always looked a little like crap,” Mr. Olsen continued to purchase lenses.

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