I have a small business (LLC) that made some good net profit this year. I hired an accountant for the first time to do my taxes this year and he is advising me to put some money in these other businesses that he knows that are loosing money. His advise is that if I buy 10% of another business that lost 200k, I will get 20k of those losses to "write-off" some of my profits and therefore pay less taxes. This other business will issue me a K1 so I can show losses on my taxes. He told me he can find me a few more of such opportunities before year end. He also told me that this purchase is only valid for two years and the seller has the right to buy my shares back for $1 after two years, so there is no chance that this investment will actually be profitable for me besides saving me taxes right now. My question is if this is legal? Since i do not know this accountant well enough, I want to find out if this is a common practice. The accountant told me that these type of "tax shelters" are very hot and therefore I have to answer him in two days if I am interested.
Thanks in advance for any advise.
Thanks in advance for any advise.