How to Spot a Tax Scam Before You Buy the Brochure

I want you to keep more after tax. That is the job.

The filter that protects you is simple: Is there a legitimate business or economic purpose other than sheltering tax?

If the entity, trust, or insurance company collapses when you subtract the tax benefit, you are not looking at strategy. You are looking at a loophole with a sales deck. Ask the promoter to explain the purpose in one paragraph without using the word "tax." If they cannot, walk.

I am all in on legal tax strategy. Cash balance plans. Installment sales done the right way. Entity structure that matches how the practice actually operates. Coordinating your CPA, attorney, and wealth plan so you keep more of what you built. That work is real.

What I am not for is a brochure that dresses up a paper trick as planning. The so-called Montana LLC car play is a clean case study in that pattern. The villain is not the dentist who wanted to keep more. The villain is the pitch that sold certainty while skipping the rules of the state where the car actually lives.

Montana as proof of the rule

Montana has no statewide sales tax. You can form an LLC there. You can title and register a vehicle to that LLC under Montana's rules. On paper, that is Montana law.

The product sold to owners in California, Florida, Utah, Tennessee, and elsewhere was something else.

Buy the car. Form (or buy) a Montana LLC that "owns" it. Register it in Montana. Keep driving it where you live. Skip your home state's sales or use tax and the higher registration fees. Pay a promoter for the paperwork and the registered agent.

That story only works if you ignore what high-tax states already wrote into law: if the vehicle is primarily kept and used in your state, you generally owe that state's use tax and registration, no matter what plate is on the bumper. California's rule, for example, expects the vehicle to be first used and kept out of state for the required period, with real out-of-state delivery documented. Paper Montana ownership does not erase primary use in your home garage.

So this was never an IRS blessing, and it was never a blessing from your state's tax department. It was a gap between Montana's registration rules and another state's use-tax rules, sold as if the second rule did not exist. California's CDTFA and DMV have tied thousands of sales to this pattern and put the annual revenue hit in the tens of millions. Tennessee's Department of Revenue calls out-of-state LLC vehicle registration a scheme when the car is primarily used in Tennessee. Other states are building the same enforcement muscle with audits, plate data, and dealer reviews.

If you already used a Montana LLC this way, that is a conversation for your CPA and counsel in your state, not a blog post. The point here is the filter.

Why the promoted version was never a strategy

Real tax planning has a legitimate business purpose beyond "pay less tax." The structure matches economic reality. The entity does something. Risk and ownership line up with how money and assets actually move.

The Montana car structure, as promoted to out-of-state drivers, failed that test from day one.

There was usually no Montana business. No fleet based in Montana. No employees. No operations. The LLC existed so a car that lived in your home state could wear a Montana plate. When sheltering tax is the only purpose, you are not doing planning. You are shopping for a story.

Promoters often called it avoidance. Home-state regulators increasingly treat the sham version as evasion: deliberate misrepresentation of where the vehicle is used. That distinction matters. Avoidance uses the rules as written. Evasion hides the facts those rules care about. A shell LLC and a false "used in Montana" story hide the facts.

We did not need a 2026 headline to know that. Substance-over-form and business-purpose tests have been around for decades. If the only reason the entity exists is to change the tax result while nothing about real-world use changes, expect the government to look through the paperwork.

Six warning signs before you buy the brochure

Watch for the same pattern every time a product is sold hard to successful dentists and practice owners.

1. The pitch leads with tax savings, not operations.
"Save tens of thousands on the purchase" is the headline. "Here is the business that will run in Montana" is a footnote, or missing.

2. The structure has no purpose if you remove the tax.
Ask: if sales tax were identical in every state, would anyone still form this LLC? If the answer is no, you are looking at a tax play, not a business.

3. A specialized promoter sits between you and your regular advisors.
Your CPA did not invent it. Your attorney did not invent it. A company that forms Montana LLCs and "handles the plates" invented it, and gets paid when you buy in.

4. The marketing sounds certain.
"Fully legal." "IRS approved." "Everyone does this." Legitimate strategies come with tradeoffs, documentation, and a CPA who will put their name on the return. Certainty is a sales tool.

5. Your home state's rules are waved away.
If the brochure talks only about Montana law and never about use tax where you garage the car, that omission is the product.

6. Enforcement feels distant until it does not.
Plate readers, dealer audits, insurance and toll data, and criminal cases are how this one is unwinding in California, Tennessee, and elsewhere. The same arc shows up in federal watch-list products: promote quietly, scale hard, then disclosure and penalties.

The same filter on products pitched into dental exits

The car plates are a state use-tax story. The same "no purpose except tax" test shows up in federal products sold into dental exits and high-income years.

Monetized installment sales.
A real installment sale under IRC section 453 can defer gain when you actually receive payments over time. A monetized installment sale tries to give you cash up front (through a loan or intermediary) while still claiming deferral. The IRS has put these on its Dirty Dozen list and moved to treat them as listed transactions. If you get the economic benefit of the cash now, pretending the tax waits is the red flag.

Deferred sales trusts (as heavily promoted).
Some promoters sell a "deferred sales trust" so you can sell a practice or real estate, park the proceeds in a trust, and defer tax under installment-sale ideas. The IRS has not blessed a branded DST product. Related structures that put cash in your pocket while claiming deferral sit in the same risk neighborhood as monetized installment sales. Independent tax counsel, not the promoter's memo, should stress-test any version before you sign a letter of intent.

Abusive micro-captive insurance.
A real captive can insure real risks for a real business. Abusive micro-captives, flagged by the IRS for years, charge large "premiums" for thin or implausible coverage, often stacked on top of ordinary commercial insurance, mainly to generate deductions. Dental offices have shown up in the case law for exactly that kind of mismatched risk. If the captive makes no sense without the deduction, treat it like the Montana plate: the tax is the product.

Syndicated conservation easements belong on the same mental list for high earners chasing oversized charitable deductions, even if they show up less often in a DSO process. Different packaging. Same test.

Before you sign, run the one-paragraph test

Before you buy a structure that sounds too clean, run it past advisors who do not earn a fee for saying yes. Ask for the business purpose in one paragraph without the word "tax." If they cannot write it, walk.

If you are mapping what you keep under a practice sale, that is a different conversation, and it is a legitimate one. Book your 25-minute Exit Stress Test and we will look at structure that can survive a second look, not paperwork that only works until someone checks the garage.

This article is for educational purposes only and is not tax, legal, or investment advice. Consult your own qualified professionals about your situation.