A business loss at a publicly traded company used to flow to the company itself. For non-corporate pass-throughs, which pass on their deductions and income to their owners, the deduction flowed through to the entity owner’s personal tax return. That usually allowed the owner to offset, or reduce taxes upon, all of his or her non-business income from salaries, dividends and capital gains. Business losses that exceeded that other income could be carried back two years or forward 20 years.
But the new excess business loss cap “will come as a surprise to a lot of people that have not been really doing hard numbers throughout the year,” said David Kirk, a partner in private client services at Ernst & Young’s National Tax Department and a former IRS lawyer.
The cap, in force until 2026, is supposed to raise nearly $150 billion over a decade, according to Congress’s Joint Committee on Taxation.
“This is an industry that likes private planes, gets paid a lot of money and wants to minimize taxes,” Kosnitzky said. So with the workaround to the GOP tax law, “no one should be surprised.”
This article was provided by Bloomberg News.