The following is from the Washington Post article in 1978 on how the scheme worked. Pickens RR was another boxcar tax shelter too:
"Purchase of a new boxcar qualified the buyer for a federal investment tax credit amounting to 10 percent of the car's value, a direct write-off $3,000 - equal to the down payment."
"Depreciation also could be deducted from taxes; under the method used by most buyers, that amounted to a $3,000 deduction the first year. In addition-boxcars, which perennially are in short supply, are eligible for a bonus depreciation deduction the first year amounting to $2,000."
"Other expenses could be deducted, too: placement fees paid to put the car in service, management fees paid to Railvest and interest on the borrowed money; the total of these deductions varied, depending on when the car was purchased and other factors, but easily amounted to $1,000."
"Thus the $3,000 invested in a down payment immediately produced an offsetting tax credit of $3,000 and tax deductions of $6,000. The tax treatment of the boxcar investment has not been challenged by the Internal Revenue Service, several investors said."