New York Times:  How to Know When a Tax Deal Isn’t a Good Deal, by Lynnley Browning:

You have just left the accountant’s office with a plan to keep more of your hard-earned millions of dollars in your hands, rather than turning them over to the IRS. Smart, legal tax planning? Or the first step toward a nasty audit — one that could cost you seven figures in unpaid taxes, interest and penalties; might get you sued by the agency; and could even end in a perp walk?

With both the IRS and the Justice Department’s tax division widening their crackdowns on questionable tax shelters to include scrutiny of offshore banking services and trusts, the issue of safe tax planning for the affluent has become more urgent than ever. …

Prof. Michael J. Graetz, who teaches at Yale Law School and is a former Treasury official, has helped to define abusive tax shelters, calling them “a deal done by very smart people that, absent tax considerations, would be very stupid.” …

“Here are three warning signs that a tax deal should be avoided,” said Tanina Rostain, a legal ethics scholar at New York Law School: “When the tax savings promised are many times the amount of the initial investment, when you are told that there is no financial risk involved and when you are urged not to show it” to anyone else. “When the stakes are big,” she added, “getting a second opinion from a tax expert not involved in the deal is a good idea.”