Legal Question in Tax Law in Minnesota

Burnt-out Tax Shelter Letter

I received a letter from a company ''inform[ing] [me] of an opportunity to sell [my] limited partnership interest'' in an investment transaction I was a part of some years ago. The letter goes on to state that this company has a corporate investor interested in acquiring LP interests in ''burnt-out tax shelters[] which now generate 'phanton income.''' This program, they claim, has created a market for investors who lack the ability to change the circumstances surrounding the illiquid nature of these partnerships.

The letter describes the typical characteristics of a pre-1986 Tax Reform Act LP and states that, because of the ''unique position'' of the corporate investor they've located, this investor is able to justify paying a higher value for my LP interest than others are willing to pay.

I am asked to call if interested and to send, via an enclosed envelope, a copy of my most recent K-1 (I am instructed to black out my social security number).

I noticed you responded to a similar internet inquiry on Oct. 4 of this year. Does this sound legitimate to you? I had never heard of a ''burn-out tax shelter'' before I received this letter.

Any insight you might be able to share would be greatly appreciated

Asked on 10/28/06, 1:06 pm

1 Answer from Attorneys

Matthew Kelly Kelly Law

Re: Burnt-out Tax Shelter Letter

Changes in the tax law in 1986 (addition of passive loss rules) made some real estate and other "tax shelter" lP's "burned-out." That is, a limited partner was no longer able to take "paper losses (for such things as depreciation) if they weren't materially particpatinmg in the business.

The rules haven't changed so I don't know why someone would be interested in purchasing your LP interest at this time. Do you make $ off of it? I don't know if it is a scam or not but would not advise sending anybody confidential tax information before I met with them and had an agrement (with an escrowed deposit) in hand.

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Answered on 10/30/06, 10:58 am

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