To deduct your business loss, you must materially participate in your business activity. If you fail to materially participate in your business, your loss is considered a passive loss. Most passive losses are bad because you
can deduct your business passive losses only against other passive income (or if your income is low, you can qualify for the $25,000 exception);
carry forward unused losses to next year, when you again jump through the same passive loss hoops; or
may have to wait until you sell or otherwise totally ... Log in to view full article.