When you own more than one business, you need to consider the grouping rules that apply for passive loss purposes.

Should one of your businesses lose money, you may not deduct the losses from that business unless you

materially participate in the business or, if grouped, in the group; or

do not materially participate, but have passive income from other sources against which to deduct your passive business losses.

Example. Sam Warren, MD, operates a medical practice and starts a new physical therapy business in which he will not materially participate. The physical therapy business is going to lose money during it first years of operation. If Dr. Warren wants to deduct ... Log in to view full article.