If one operates a business that loses money, you’re entitled to declare the loss against your overall tax liability. What I may be misunderstanding is the practice of deliberately maintaining such a liability– or even going out of one’s way to acquire ownership of one. Is there any way that such a white elephant is actually beneficial in some circumstances?
If the tax right-off exceeds the cost of running the unprofitable business, you win in the long run. But given the cost to start up and run even an unprofitable business, this may not be as straightforward as it seems.
But if that ever happens, it’s a sign that the tax code is flawed.
Probably not with just an operating loss; but if one can compound that with other tax breaks it can yield a net positive?
There are some businesses that throw off tax losses that are not matched by cash losses. I know my brother and sister in law report losses on their tax returns from real estate rental activity, but have massively positive cash flow (like to the tune of several million in the last decade). At some point in the future they might have massive tax gains that aren’t matched by cash flow, but they don’t expect that point to come until after they retire or maybe even expire.