Scam-9: Structured entity credits

Promoters of this newly identified scheme set up partnerships to own and sell state conservation easement credits, federal rehabilitation credits and other credits. The purported credits are the only assets the partnership owns. Once the credits are fully used, the investor receives a K-1 indicating the initial investment is a total loss, which the investor then deducts. However, the IRS says that since the entities are not established with a viable business purpose, the investments are not valid and the losses are not deductible.

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