The Justice Department and the Internal Revenue Service are investigating a New York securities dealer accused by the government of providing more than $50 million in fraudulent federal income tax write-offs for show business celebrities, bankers, lawyers and businessmen, according to court records.

The records filed in federal court in New York show that the two-year investigation has focused on Michael Senft and two of his firms: Sentinel Government Securities, a major dealer in government securities, and Sentinel Financial Instruments, a related firm. The documents indicate that in the month of November, 1981, alone, Sentinel Government Securities handled a volume of $1.3 billion in government securities trading.

In memos and affidavits filed with the court in connection with a 1981 IRS search of Senft's offices, the government has charged that most of Sentinel's trading was fraudulent and intended to create tax losses for about 88 persons and companies who invested about $56 million in cash and promissory notes.

Among those who invested in Sentinel were television and film producer Norman Lear, actor Sidney Poitier, composer Henry Mancini and others, including several Washington lawyers. Each investor generally bought one or more $600,000 units with $150,000 in cash and a promissory note of $450,000.

According to several investors, who granted interviews on condition that they not be identified, they were able to deduct from their taxable income about four times the amount of cash invested. The investors are likely to face civil action by the IRS to recover back taxes, according to government sources familiar with such investigations.

There is no indication in the court records that the investors were aware that their tax write-offs were based on allegedly false transactions. According to a government affidavit, "It was an essential part of the scheme to deceive both the IRS and the customers into believing they were legitimate operations. Therefore both entities firms created a facade of regularity. This extended to doing some legitimate trading . . . ."

Government affidavits charged that the two Sentinel companies "were engaged in an almost solely criminal operation" and that the losses passed on to the investors were "created through false and arranged trades both in house and with other houses. For the period involved, almost all of SFI's trading was false . . . ."

Attorneys for Senft said they have advised him not to comment on the case. Senft is listed in "Who's Who in Finance and Industry" as 43 and a graduate of Brooklyn College who has spent his entire career in the New York financial world.

Paul Vizcarrondo Jr., who is representing Senft and his firms, said, "We can't comment about the investigation or charges that haven't been brought. It's very hard to defend unclear or unexact charges disclosed to the press."

Bernard W. Nussbaum, a partner of Vizcarrondo, recently told the National Law Journal, "We are in the process of making presentations to the government with respect to this matter, and we are hopeful that responsible officials in the Department of Justice will determine that there have been no violations of criminal law."

Sentinel Financial Instruments began operations in 1978, and Sentinel Government Securities started in September, 1980. The first limited-partnership interests were sold in December, 1980. The court records indicate that losses of $50 million were passed on to the 88 limited partners in 1981 for the previous tax year.

By November, 1981, Sentinel was flying high. Written statements by the company indicate it was trading that month at a volume of $234 million per day. According to its annual report, Sentinel counted among its customers some of the most powerful corporations in the country: AT&T, Ashland Oil, Boston Safe Deposit and Trust, Eastern Airlines, Gulf Oil Securities, Procter & Gamble, Trans World Airlines and U.S. Steel Corp.

Court records stated that Senft earned a $288,640 "management fee" from Sentinel Government Securities for the first half of 1981.

The investors interviewed said the first indication of trouble came Nov. 17, 1981, when nearly 40 government agents armed with a search warrant raided the firm's Wall Steet office, taking at least 100 boxes of documents.

No indictments have been filed in the case. A large volume of information about the firms' operations has been generated by Sentinel's efforts in court to retrieve the information seized by the government.

In an opinion filed on Jan. 28, 1982, U.S. District Court Judge Charles S. Haight Jr. said that the Sentinel companies are the "target" of a grand jury inquiry triggered by information received from a confidential informer "in a position to furnish the government with detailed descriptions of the company's activities."

The judge said that the federal grand jury in New York is looking into whether Sentinel Financial Instruments "has engaged in a widespread false trading operation, manufacturing documents so that customers could reduce their income tax liability . . . [while] Sentinel Government Securities is the target of an inquiry into comparable falsification of documents in order to provide tax losses to its limited partners."

On July 18, 1983, U.S. Attorney Rudolph W. Giuliani, whose office is conducting the investigation, said in a subpoena filed in court that the investigation involves allegations of "conspiracy to defraud the IRS, mail fraud and aiding and abetting filing false returns."

When asked about this last week, Giuliani said he could not provide further details on the case because it is the subject of a grand jury investigation.

In 1982, following the government raid on Sentinel's offices, Senft relieved all the investors of any obligation on the promissory notes and refunded 10 percent of the cash investment.

Most of the Sentinel investors reached were reluctant to talk about the matter because of the possible tax implications. One said the company looked legitimate, "even gilt-edged. We had every reason to believe this was a proper business operated in a proper fashion."

Another investor, who has testified before the grand jury, said many of the limited partners who consider themselves financial sophisticates are embarrassed by the sudden scrutiny, "especially the big-deal investment types who are suddenly finding themselves caught on the outs."

Another investor explained that, with an investment of $150,000 in cash and $450,000 in promissory notes in 1980, he was able to deduct almost the entire $600,000 in 1981.

Some of the investments were considerably larger. Norman Lear, for example, is listed in court documents as having invested $450,000 in cash and $1,350,000 in notes. He did not respond to requests for an interview.

Producer Allan Carr, who is listed in Sentinel records obtained by the government as having invested $450,000 in cash and $1,350,000 in notes, denied any involvement with the company. The address listed for him in the records is the same as Carr's address in "Who's Who."

Reached in New York, where his play, "La Cage aux Folles," recently opened, Carr said, "I'm not an investor in any such thing. I've never heard of them. I do have a business manager who takes care of these things, but I'm sure I'd know about an investment that large."

However, Daniel Gottlieb, Carr's financial adviser, said in a telephone interview from his Beverly Hills office that Carr is currently an investor in Sentinel.

Besides the show business celebrities, the investors also included lawyers and businessmen with extensive knowledge of tax laws.

The three top executives from City Investing Co. are listed in court documents as investors. George T. Scharffenberger, chairman of the board of City Investing and a member of the board of directors of Georgetown University, is listed as having invested $900,000 in cash and $2,700,000 in notes. Company President Peter C.R. Huang is listed as investing $225,000 in cash and $675,000 in notes, and Executive Vice President Daniel E. Lyons is listed as investing $150,000 in cash and $450,000 in notes.

A spokesman for City Investing said that the three officials believed it would be "inappropriate to discuss it."

The list of investors also includes three members of the Washington law firm of Dickstein, Shapiro and Morin. Sidney Dickstein, David Shapiro and Charles Morin each are listed as investing $150,000 in cash and $450,000 in notes.