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ARTICLE · 16 DECEMBER 2009

Investment Loss Disallowed

Cozen O'Connor
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A panel of the Commonwealth Court disallowed a claimed business loss of over $21 million on the grounds that a settlement with the Internal Revenue Service regarding the same loss amounted to an admission that the investment was not made with the intention of making a profit.

United StatesTax
Joseph Bright
Joseph Bright

A panel of the Commonwealth Court disallowed a claimed business loss of over $21 million on the grounds that a settlement with the Internal Revenue Service regarding the same loss amounted to an admission that the investment was not made with the intention of making a profit. Hvizdak v. Commonwealth, No. 739 F.R. 2006 (Pa. Cmwlth., Nov. 19, 2009).

The taxpayer filed a nonresident Pennsylvania Personal Income Tax (PIT) return, claiming a loss of over $21 million passed through from Brown Fox Partners Fund LLC, in which taxpayer owned an interest. Brown Fox evidently was an investment partnership. It did not file a Pennsylvania partnership information return. The PIT statute provides that a nonresident is subject to PIT on income from sources within Pennsylvania, including his or her distributive share of the income of an unincorporated business apportioned to Pennsylvania and income from intangible personal property employed in a trade, profession, occupation or

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