Surprise two tax payer find that taking your C Corporation’s losses on your individual return is a no-no.
Two brothers who were the sole shareholders in a regular C Corporation which operated a cattle business deducted the firm’s losses on their 1040 returns.
The brothers, who owned the livestock, claimed that the firm acted as their agent. But its overall business purpose was to manage and run the cattle operation.
It hired and paid employees, took out workers’ compensation and other insurance policies, purchased equipment and feed, and bought and sold cattle in the corporations name.
Thus the losses belong to the corporation; not its stockholders.
Barnhart Ranch Company, 5th Cir.