No business wants to lose money and no business owner wants to go through the pain of losing money and not knowing whether the money will come back or not. Let’s say that you hope that you make the money back in the future; let’s say the future is a couple of years out. Well, the government allows you to carry forward losses sustained in a specific year to the future. These losses can be used to offset future profits, so not all is lost. Let me give you an example: A client operates in the sector of financial services where the net profits are in the six figures range. Such business does quite well as the owner has been operating in the industry for over twenty years and has great know-how power in his favor. However as an entrepreneur, he decided to invest, via LBO (Leverage Buyout), on business ventures in the service industry. This purchase incurred a lot of sunk costs, as most of the capital was deployed to buy PP&E. And what is the advantage of buying equipment, especially when it’s financed… Bingo= Depreciation! So even though this endeavor was seasonal, most of the money is made in the spring and summer, it did have some profits. But the biggest advantage is depreciation at a clip of five figures per year is that it created a Net Operating Loss that has been carried over and had offset the profits of the main business for the last couple of years. This has been a great advantage during the tax planning stages for a business owner.