Tax shelters reduce current tax liability by offsetting income from one source with losses or deductions from another source. The IRS allows some tax shelter, but will not allow a shelter which is "abusive." An abusive tax shelter generally offers inflated tax savings which are disproportionately greater than your actual investment placed at risk. Generally, you invest money to generate income. However, an abusive tax shelter generates little or no income, and exists solely to reduce taxes unreasonably for tax avoidance or evasion. In comparison, a legitimate tax shelter often produces income and involves a risk of loss proportionate to the investment. Abusive tax shelters are often marketed in terms of how much you can write off in relation to how much you invest. A series of tax laws have been designed to halt abusive tax shelters.

References:

• Publication 2193 (PDF), Too Good to Be True Trusts