"’Unified Business Enterprise” Theory


Under Code §183, individuals and S corporations desiring deductions for their business activities must be engaged in the activity “for profit.” Activities which consistently generate losses may be presumed to be not for profit.

A recent case illustrates a seldom-discussed theory or concept, known as the “unified business enterprise” theory. Under this theory, a taxpayer conducting activities in isolation which generate losses and thus may be considered not to be “for profit” under Code §183, may be able to aggregate that activity with other activities conducted either individually or through other commonly controlled entities to come up with a profit motive for an aggregate, or “unified business” enterprise that will avoid the limits of Code §183.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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