Complex Tax Issues
Tax Promoter & Tax Shelter Issues
Key Takeaway
If you participated in a tax shelter or aggressive tax strategy that’s now under IRS scrutiny, your defense hinges on establishing good-faith reliance on professional advice and cooperating strategically with investigators.
You Took Tax Advice. Now the IRS Calls It a Shelter.
Not every aggressive tax strategy is a shelter — but the IRS treats many of them that way. If you participated in a transaction the IRS considers abusive, you may face accuracy-related penalties of 20-40%, a substantial understatement penalty, or even civil fraud penalties. For promoters, the penalties can reach 100% of gross income from the transaction.
Listed transactions, syndicated conservation easements, micro-captive insurance arrangements, and certain partnership structures have all drawn intense IRS scrutiny. If you participated in any of these, you may already be on the IRS’s radar.
We defend both participants and promoters in IRS investigations of tax shelters and listed transactions. Our goal is to minimize penalties, resolve civil exposure, and prevent criminal referral.
From Our Practice
We’ve defended clients who participated in tax shelters ranging from micro-captive insurance arrangements to syndicated conservation easements. The common thread: the IRS is now prosecuting the promoters and coming after participants. Our defense strategy focuses on establishing the client’s good-faith reliance on professional advice.
Talk to a Tax Attorney
Free 15-minute call. No obligation. We’ll tell you exactly where you stand.
What We Handle
Tax Shelter Defense Services
Listed Transaction Defense
If you participated in an IRS-listed transaction, we defend against enhanced penalties and manage the disclosure and resolution process.
Promoter Investigations
For tax professionals and promoters facing IRS investigation, we provide aggressive defense against promoter penalties under Sections 6700 and 6694.
Penalty Defense
We challenge accuracy-related penalties, substantial understatement penalties, and fraud penalties using reasonable cause, professional reliance, and other statutory defenses.
Syndicated Conservation Easement Defense
The IRS is targeting syndicated conservation easement transactions. We defend participants against proposed disallowances and penalties.
Micro-Captive Insurance Defense
Micro-captive insurance arrangements under Section 831(b) face heavy IRS scrutiny. We defend participants in audits and appeals.
Voluntary Disclosure
For participants who want to come forward before the IRS finds them, we negotiate voluntary settlements that minimize penalties and eliminate criminal exposure.
Understanding the Landscape
Tax Shelters: What You Need to Know
What makes a transaction a ‘tax shelter’?
The IRS defines tax shelters broadly. A transaction can be classified as a ‘listed transaction’ (specifically identified by the IRS as abusive), a ‘reportable transaction’ (meeting certain characteristics), or a ‘transaction of interest’ (with potential for abuse). Each classification carries different disclosure requirements and penalty exposure.
What are the penalties for participating in a tax shelter?
Participants face accuracy-related penalties of 20% (or 40% for non-disclosed transactions), plus interest. For listed transactions, the penalty applies regardless of whether the taxpayer had a reasonable basis for the position. Promoters face penalties of up to 100% of gross income.
In egregious cases, the IRS may pursue criminal prosecution for tax evasion or conspiracy to defraud the United States.
What about syndicated conservation easements?
The IRS has listed syndicated conservation easement transactions as abusive tax shelters. Participants who claimed inflated charitable deductions based on inflated appraisals face disallowance of the deduction plus penalties. The IRS has won several major court cases challenging these arrangements. If you participated in a syndicated easement, you should seek legal counsel immediately — the IRS is systematically working through these cases.
Can I settle with the IRS?
The IRS has offered settlement initiatives for certain listed transactions, including syndicated conservation easements and micro-captive insurance. These settlements typically involve conceding the tax benefit in exchange for reduced penalties. Whether to settle depends on the strength of your specific case and the terms offered.
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Not Sure Where You Stand?
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Why Brotman Law
Defense When the Stakes Are Highest
Penalty Defense Expertise
Tax shelter penalties are among the most severe in the code. We know every defense and every exception available.
Promoter Representation
We represent both participants and promoters — understanding both sides strengthens our defense for either.
Criminal Exposure Management
We assess criminal risk and take steps to prevent civil cases from escalating to criminal referral.
Settlement Negotiation
When the IRS offers settlement terms, we negotiate to minimize your concessions and maximize penalty reduction.
Listed Transaction Experience
We’ve handled cases involving conservation easements, micro-captives, and other listed transactions the IRS is actively pursuing.
Confidential Assessment
We evaluate your exposure honestly and confidentially, giving you a clear picture of your risk and your options.
Learn More
Tax Shelter Guides & Resources
Criminal Tax Defense
If your tax shelter involvement carries criminal risk, learn about our defense practice.
Read the Guide →Free GuideIRS Audit Defense
Tax shelter participants face aggressive IRS audits. Learn about our defense approach.
Read the Guide →Free GuideFree Tax Resources
Guides to understanding IRS enforcement priorities and your rights.
Read the Guide →Frequently Asked Questions
Tax Shelter FAQs
How do I know if my transaction is a listed transaction?
The IRS maintains a public list of transactions it considers abusive (Notice 2009-59 and subsequent notices). If your transaction matches the description, it’s listed and subject to enhanced penalties and disclosure requirements.
What is the penalty for not disclosing a reportable transaction?
Failure to disclose a reportable transaction carries a penalty of $10,000 for individuals and $50,000 for entities per failure. For listed transactions, the penalties are $100,000 and $200,000 respectively.
My advisor recommended this strategy. Am I still liable?
Generally, yes. Reliance on professional advice can be a defense to penalties, but only if the reliance was reasonable and in good faith. The advisor must have been competent in the area, you must have provided complete information, and the advice must have been based on all relevant facts.
Should I participate in an IRS settlement initiative?
It depends on the strength of your specific case. Settlement initiatives offer certainty and reduced penalties, but you concede the tax benefit. If your position has legal merit, fighting may produce a better outcome. We evaluate both options and advise accordingly.
Can I be held criminally liable?
In cases involving fraud, willful tax evasion, or conspiracy, criminal prosecution is possible. Promoters face higher criminal risk than participants. We assess criminal exposure early and take steps to protect you from escalation.
What is a ‘transaction of interest’?
A transaction of interest is one the IRS has identified as having potential for tax avoidance but hasn’t yet listed as abusive. Participants must disclose these transactions but face less severe penalties than listed transactions. However, the IRS may later reclassify a transaction of interest as a listed transaction.
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