From another poster's comment, it appears that I just didn't understand the article -- that it's always been possible to deduct for losses, but the question was, who's an ACTIVE investor. So I guess in MY hypothetical, I'd have gotten taxed on $25k, not $50k.
As to your hypothetical, though, my curiosity is piqued:
Let's say the Household's businesses are losing $250k a year of the Household's money.
Why should they pay tax on $500k of income? Their income is $250k in your hypothetical.
If the businesses ARE losing money, then the household as a unit has less income, so why not tax the household on its actual income?
The point was they have to be profit-seeking businesses not just hobby tax dodges.
If I spend $10K on improvements to my daily driver classic Mustangs, I shouldn't be able to deduct those expenses. If I was a business engaged in restoring them for re-sale, then those expenses should be deductible.
Grandparent's point was if husband makes a ton of money at his day job, that his wife shouldn't be able to call their hobbies of sailboating or horses or their vacation house that they rent out to friends one weekend a year as "businesses" that lose money and as a result make those expenses payable with untaxed income.
As to your hypothetical, though, my curiosity is piqued:
Let's say the Household's businesses are losing $250k a year of the Household's money.
Why should they pay tax on $500k of income? Their income is $250k in your hypothetical.
If the businesses ARE losing money, then the household as a unit has less income, so why not tax the household on its actual income?