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Shelter for Shelters?

The IRS may not like 'em-but the courts don't seem to mind.

This story appears in the September 2001 issue of Entrepreneur. Subscribe »

While business owners may be encouraged by two recent court decisions that overturned Washington's drive to crack down on abusive tax shelters, experts say they shouldn't be too encouraged. That's because these defeats may prompt Congress to take legislative steps against shelters, says Thomas P. Ochsenschlager of accounting firm Grant Thornton LLP.

In one case, a federal appeals court rejected the U.S. Tax Court's opinion that UPS used a sham insurance policy to avoid paying millions of dollars in corporate income taxes. (Transactions whose only purpose is to avoid the payment of taxes are considered "shams.") In the other case, a court of appeals overturned a federal district court ruling that IES Industries Inc. took part in sham stock trading to keep from paying nearly $100 million in taxes.

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