btsax covers it pretty well in his response. If you have a side business where you can show gains most of the time punctuated by an occasional year of losses, that’s really the best strategy. If you have losses in 3 out of any 5 consecutive tax years the business gets downgraded to a hobby and you can no longer use the losses to offset personal income. So if you know accounting tricks to delay or accelerate income you can have 2 years of steep losses and 3 years of tiny gains for every 5 year period.
btsax covers it pretty well in his response. If you have a side business where you can show gains most of the time punctuated by an occasional year of losses, that’s really the best strategy. If you have losses in 3 out of any 5 consecutive tax years the business gets downgraded to a hobby and you can no longer use the losses to offset personal income. So if you know accounting tricks to delay or accelerate income you can have 2 years of steep losses and 3 years of tiny gains for every 5 year period.