Candelaria v US

100 AFTR 2d 2007–6381.
US District Court, Texas

Summary

In general, losses from one business can offset income from another business. However, the IRS will often try to prevent this by arguing the losses were passive and thus limited to offsetting passive income only.

In this case the Tax Court ruled that the IRS was wrong, the losses were not passive, and its interpretation of the tax law was “flawed”.