This student note examines the consequences to investors who initially invest through tax shelters, and whose investments later fail, resulting in liability. The author questions policy for treating those investments in a similar manner to other securities fraud, by looking at the history and procedure of a 10b-5 private cause of action. Tax returns can be used to evaluate the liability and penalties for SEC actions and the ensuing private actions. The author concludes that because 10b-5 actions are judicially created, they must be carefully cabined and screened for reliable indications of harm to the investor. Tax returns should be discoverable in order to determine the extent of the plaintiff's damage, despite the seeming breach of confidentiality, because discoverable tax returns aid in furthering judicial policy of equity.
Risa A. Levine,
Tax Shelter as a Security: the Use of Tax Returns in a 10b-5 Action,
14 Fordham Urb. L.J. 259
Available at: http://ir.lawnet.fordham.edu/ulj/vol14/iss1/5