Detouring the Tax Reform Act of 1976: Tax Shelter Proprietorships

After briefly reviewing the so-called abusive aspects of tax shelters which led Congress to enact the Tax Reform Act of 1976, the authors focus on an unintended loophole-the tax shelter proprietorship. The tax shelter proprietorship remains a viable method of reducing federal income taxes payable by high bracket taxpayers. The business mechanics and tax aspects of a sound recording proprietorship are analyzed and specific suggestions for future reforms to deal with the problem of tax shelter proprietorships are delineated.