DangerousMinds: 'Tax Scam Records': Artist discovers albums of his songs were released by shadowy companies in 1977
“Tax Scam Records” is a phrase that was coined by collectors to identify albums that are believed to have been manufactured for the sole purpose of—get this—losing money. From around 1976 until 1984, a number of record labels were established as tax shelters, with investors putting their money into albums. A financier would invest, say, $20,000 in an LP, and if it tanked, the backer could claim a loss on their taxes, based on the assessed value of the master recording. Technically, the practice was legal, but to maximize the write-off, the appraisal was often grossly inflated—as high as seven figures.
The I.R.S would come to question the legitimacy of some of these labels, and accuse those promoting shelters that focused on tax benefits—rather than the music being bankrolled—of perpetuating fraud.
Anything was seemingly fair game for a tax shelter album, including LPs previously issued as private press records, demo tapes by aspiring artists, and studio outtakes by name acts. Some labels were so brazen, they released albums using material by groups as big as Led Zeppelin and the Beatles.
Album of Beatles Christmas messages, 1981
Another issue that caught the attention of the I...
April 10, 2017
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