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Abstract

Structural features of the federal income tax system frequently make the same tax reduction' more valuable to one taxpayer than to another. There are many types of such tax reductions (including deductions and credits), creating a fertile environment for the tax shelter markets. Black letter law says tax reductions are nontransferable. In other words, taxpayers are not allowed to sell their mortgage interest deductions over the back fence to their neighbors. Yet, observation reveals some transactions where tax reductions are in effect bought and sold. This article will examine four of these transactions: business sales, divorce agreements, sale-leasebacks, and partnership special allocations.

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