Tax shelters generally cannot use the cash method of accounting. Also, uniform capitalization rules generally apply to producing property or acquiring it for resale. Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. For more information, see Publication 538 . Projected income investment.
Special rules apply to a projected income investment.
To qualify as a projected income investment, a tax shelter must not be expected to reduce the cumulative tax liability of any investor during any year of the first 5 years ending after the date the investment was offered for sale. Tax shelters that qualify as projected income investments are not subject to the registration rules for tax shelters, described earlier. However, the requirement to maintain a list of investors that is in effect for tax shelters also applies to any projected income investment, except for one an investor later transfers. See Transfer of interests in a tax shelter, later. A tax shelter that previously qualified as a projected income investment may later be disqualified if, in one of its first 5 years, it reduces the cumulative tax liability of any investor.