"If anyone ever talks to me again about tax shelters, I'll head for the hills -- after I've shot 'em," said Helen D. Brooks of Oakton, Va.

During the past two years, Brooks, retired and a widow, has lost most of the $102,000 she invested in two shelters that got into trouble. And she may face additional taxes.

Now she is worried about what will happen to her remaining partnerships if the Senate Finance Committee's tax legislation passes.

"I've lost a bundle," she said. "And the proposed law will hit me more."

In recent years, plunging energy prices have caused a number of oil and gas partnerships to fail, while rising vacancies and foreclosures have devastated some real estate partnerships in the oil patch. Now politics may increase the number of victims dramatically.

The Finance Committee's bill would not only close the door to most new tax shelters, but also would substantially reduce returns on many existing ones. It could drive into bankruptcy thousands of shelters, particularly in real estate, that depend on continued investment to pay their heavy burden of debt.

Some investors no longer could afford to make payments to highly leveraged partnerships without expected tax write-offs. Limited partners who are committed to make future payments could be forced or could decide to default, only to face lawsuits from the general partners or tax bills from the Internal Revenue Service.

Investors in bankrupt shelters could lose their entire investment or receive just a few cents back on the dollar.

Moreover, they could be subject to income taxes on the write-offs they have taken in previous years, whether participation in the shelter is terminated by the courts or by default. And, in a worst-case scenario, if the property were sold for less than the investors paid, they could face the spectre of "phantom income," or money that the IRS considers taxable income although the investors never got a penny in cash.

The legislation is designed to phase out during the next four years what many consider abusive privileges for wealthy individuals.

The savings in tax revenue from this provision would be about $48 billion, the Finance Committee estimates.

However, the bill also could have adverse consequences for the economy, according to Robert A. Stanger, publisher of the Stanger Report, the foremost newsletter on tax shelters.

He predicted "wholesale defaults" on the $9 billion to $10 billion in promissory notes made by investors and a 10 percent depreciation in income property values, resulting in a $500 billion adverse effect on the real estate industry. By investing in real estate, oil and gas ventures, equipment leasing, research and development and ventures ranging from motion pictures to cattle feeding, upper-income taxpayers have been able to use tax shelters to shield income from Uncle Sam. Losses, both paper and cash outlays, generated by depreciation, mortgage interest and the like, equal to several times the actual investment can be deducted from wages and other ordinary income in the early years of the shelter.

Under the Senate committee's version of tax revision, such deductions would be progressively disallowed, starting with 35 percent next year and ending with 100 percent in 1991. Exceptions are made for working partners in oil and gas who assume more risk than others, and, to a limited extent, for some people "materially engaged" in the management of real estate. But no existing shelters would be "grandfathered," or allowed to continue under current rules.

The Senate is expected to consider the measure early next month. If it is passed, it then must be reconciled with the House's tax bill, which is not as tough on shelters.

Capital raised by partnership programs amounted to $19.1 billion in 1985, up from $18.9 billion the previous year, according to the Stanger Report. Two-thirds of that money went into real estate. Public partnerships, registered with the Securities and Exchange Commission, outnumber private placements by 2 to 1. Only one-third of the public partnerships were shelter-oriented investments offering write-offs, such as 2 to 1 ($2 in deductions for every $1 invested) or more. Highly sheltered investments are much more common in private placements that attract big money.

Tax shelters are structured as partnerships because profits and losses flow through to the partners. Corporations, by contrast, are taxable entities, and losses do not pass through to stockholders for tax purposes.

Stanger expressed concern that not only will highly leveraged shelters (those with high ratios of debt to equity) be "severely crippled," but also that income-oriented partnerships, which offer no tax benefits, will be "flattened."

Commonly, investors buy into new shelters as the tax benefits of older ones run out in order to defer taxes for many years. For the next five years, investors will see their write-offs dry up gradually. Their return on investment will be lower than originally projected because any changes in the rate at which income is taxed probably will not offset the loss of tax deductions.

David S. Dondero and B. Frank Doe, certified financial planners in Alexandria, looked at the effect on a conservative, five-year real estate shelter with a 1.6-to-1 write-off that began in 1985. The total benefits of a $36,000 before-tax investment -- assuming all the interest earned on tax savings and cash flow are reinvested at 8 percent -- would be reduced from $54,900 to $44,400. The internal rate of return -- the figure used in the prospectus -- would skid to 3 percent annually from 18 percent, whereas the more realistic after-tax adjusted rate of return would drop to 7 percent annually from 11 percent.

If the same $36,000 before taxes had been invested in a bank certificate of deposit starting in 1985 by a person in the 50 percent income-tax bracket, the investment would be worth $23,967 after five years under the current system, and $28,427 under the proposed system. So the return on the CD would be 9 percent higher, whereas the return on the shelter would be 19 percent lower.

Because there is less difference between the two investments under the proposed law than under the current law ($15,973 versus $30,933), the question arises of whether the risks involved with the shelter would be worth it under the proposed law, Dondero said.

For more highly leveraged partnerships, the decline is even more pronounced. Gerald Wieczorek, a Dean Witter tax-shelter specialist in Lansing, Mich., calculated that the return on cash flow from write-offs of 8 to 1 on low-income housing would decrease from 12 percent annually during 10 years to 2.5 percent annually for an investor in the top bracket.

Under current law, most of the cash comes from Uncle Sam rather than from the tenants. Rents could not be expected to supplant tax write-offs. Economist Dick Peach of the National Association of Realtors predicts that the chances of default are "pretty good" in highly leveraged shelters.

Generally speaking, limited partners in existing oil and gas shelters, who usually make a single up-front payment, would fare better than limited partners in leveraged real estate partnerships, where multiple payments are common and write-off ratios are often higher. Worst off is the investor who bought a highly leveraged shelter this year with a small payment and signed a note for several future payments.

Faced with the loss of write-offs, negative cash flow from the property and years of paying into a losing proposition, such an investor may be tempted to abandon his equity in the shelter and default on future payments.

In case of default, it is likely that the limited partner will be sued by the general partner for the remaining debt. J. Roderick Heller, president of the National Corporation for Housing Partnerships, which finances low-income housing with up to went into real estate. Public partnerships, registered with the Securities and Exchange Commission, outnumber private placements by 2 to 1. Only one-third of the public partnerships were shelter-oriented investments offering write-offs, such as 2 to 1 ($2 in deductions for every $1 invested) or more. Highly sheltered investments are much more common in private placements that attract big money.

Tax shelters are structured as partnerships because profits and losses flow through to the partners. Corporations, by contrast, are taxable entities, and losses do not pass through to stockholders for tax purposes.

Stanger expressed concern that not only will highly leveraged shelters (those with high ratios of debt to equity) be "severely crippled," but also that income-oriented partnerships, which offer no tax benefits, will be "flattened."

Commonly, investors buy into new shelters as the tax benefits of older ones run out in order to defer taxes for many years. For the next five years, investors will see their write-offs dry up gradually. Their return on investment will be lower than originally projected because any changes in the rate at which income is taxed probably will not offset the loss of tax deductions.

David S. Dondero and B. Frank Doe, certified financial planners in Alexandria, looked at the effect on a conservative, five-year real estate shelter with a 1.6-to-1 write-off that began in 1985. The total benefits of a $36,000 before-tax investment -- assuming all the interest earned on tax savings and cash flow are reinvested at 8 percent -- would be reduced from $54,900 to $44,400. The internal rate of return -- the figure used in the prospectus -- would skid to 3 percent annually from 18 percent, whereas the more realistic after-tax adjusted rate of return would drop to 7 percent annually from 11 percent.

If the same $36,000 before taxes had been invested in a bank certificate of deposit starting in 1985 by a person in the 50 percent income-tax bracket, the investment would be worth $23,967 after five years under the current system, and $28,427 under the proposed system. So the return on the CD would be 9 percent higher, whereas the return on the shelter would be 19 percent lower.

Because there is less difference between the two investments under the proposed law than under the current law ($15,973 versus $30,933), the question arises of whether the risks involved with the shelter would be worth it under the proposed law, Dondero said.

For more highly leveraged partnerships, the decline is even more pronounced. Gerald Wieczorek, a Dean Witter tax-shelter specialist in Lansing, Mich., calculated that the return on cash flow from write-offs of 8 to 1 on low-income housing would decrease from 12 percent annually during 10 years to 2.5 percent annually for an investor in the top bracket.

Under current law, most of the cash comes from Uncle Sam rather than from the tenants. Rents could not be expected to supplant tax write-offs. Economist Dick Peach of the National Association of Realtors predicts that the chances of default are "pretty good" in highly leveraged shelters.

Generally speaking, limited partners in existing oil and gas shelters, who usually make a single up-front payment, would fare better than limited partners in leveraged real estate partnerships, where multiple payments are common and write-off ratios are often higher. Worst off is the investor who bought a highly leveraged shelter this year with a small payment and signed a note for several future payments.

Faced with the loss of write-offs, negative cash flow from the property and years of paying into a losing proposition, such an investor may be tempted to abandon his equity in the shelter and default on future payments.

In case of default, it is likely that the limited partner will be sued by the general partner for the remaining debt. J. Roderick Heller, president of the National Corporation for Housing Partnerships, which finances low-income housing with up to 90 percent leveraging, said outstanding investor notes at NHP amount to $100 million. "We expect most of our investors to pay," he said. "If they don't, we'll sue them."

On the other hand, when the initial payment is larger and the leverage smaller, the general partner may offer to buy out the limited partner's interest at 10 cents to 25 cents on the dollar rather than sue. "If they want to walk away, we won't sue," said Roland D. Freeman, first senior vice president of Amrecorp Realty in Dallas. "But the chances are that the recapture will be so great that the investor will owe more in taxes than he does on his installment payment."

Current law provides that an investor must repay deductions on any accelerated depreciation as ordinary income and straight-line depreciation as capital gains at the time of sale. If the property has not appreciated considerably, there may be little cash to distribute after expenses are paid, according to Dondero & Associates Ltd.

For example, in one case, the investor put $25,000 into a partnership financing a low-income property. Seven years later, the property, which had been poorly maintained, was sold for an amount that was just sufficient to cover the general partner's costs and return the limited partner's original $25,000 investment.

The limited partner, who had meanwhile taken $56,000 in write-offs, owed tax on $51,000 in long-term capital gains and $5,000 in recapture of accelerated depreciation. A person in the 50 percent bracket would have had to pay $12,700 in taxes out of the $25,000 in cash returned from the sale.

The worst-case scenario involves phantom income, meaning that a person has to pay taxes on money that he or she never actually received. Suppose the property were overvalued, underrented and the general partner went bankrupt. When the partnership sold the property -- or went into foreclosure, which is treated as a sale by the IRS -- the proceeds were not enough to pay off the mortgage, so the limited partner got nothing back. Yet, he still owed taxes on $56,000 from the write-off. In that case the investor would have had phantom income of $25,400 (40 percent of $51,000 plus $5,000), on which he had to pay $12,700 taxes out of his own pocket.

So, the investor not only lost the $25,000 initial investment, but had to pay $12,700 in taxes besides.

Consequently, the investor who considers walking away from an existing tax shelter should weigh the tax consequences of recapture and/or phantom income, plus the possibility of being sued, against the cost of making the remaining payments. It is also possible that walking away could become more expensive next year under the Packwood bill than this year, Freeman advised, because what are now capital gains will be taxed at a top rate of 27 percent instead of at the current effective rate of 20 percent.