The AICPA Tax Executive Committee has sent a letter to the IRS suggesting changes be made to the instructions for Form 461, Limitation on Business Losses. The form is used to compute the limitation on business losses that was added by IRC §461.
Generally, under IRC §461 a taxpayer is limited to net business losses in excess of business income of $250,000 in a single year ($500,000 for a married couple filing a joint return). The AICPA comment addresses a concern that the definition of a trade or business in the instructions may be too limiting. The current definition in the regulations reads as follows:
An activity qualifies as a trade or business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity.Read More