Small Business Prevails in Tax Court Case

A Tax Court decision last week could allow entrepreneurs and investors in small businesses to deduct losses against salary and investment income even for LLPs and LLCs.

The Wall Street Journal had a good writeup yesterday on the decision.  The case concerned a Nebraska farming couple, Paul and Alicia Garnett, who raise chickens and pigs and wanted to deduct losses from their operations. However, the implications could be a lot bigger than the hogs on their farm, and they could apply to any number of small businesses that operate as LLPs and LLCs.

Major credits to the Tax Court on this decision, which could rake in a lot of business for accountants whose clients may be able to start deducting these losses. The IRS may appeal the decision, though, or convince Congress to change the law.