Tax Court Again Rules Farm in a Hobby Loss
The Tax Court released an updated opinion on the Schwarz hobby loss case
The US Tax Court issued a memorandum opinion on Monday November 24, 2025 in the Gary M. Schwarz v. Commissioner case (T.C. Memo. 2025-122).
We had posted on this case when it was first issued more than a year ago. The reason the Tax Court issued an updated opinion was due to the plaintiffs raising an argument that the two regulations under Section 183 dealing with hobby losses were invalid due to the Supreme Court Loper Bright case decided after the original Schwarz case was issued.
In that case, the Supreme Court reversed the Chevron case granting more broad authority to the administration to interpret law.
In this case, the Tax Court originally found that the taxpayer had two separate activities - a real estate operation and a farm operation. They then decided that the farm operation was in fact a hobby and thus disallowed major losses for the years under audit.
The plaintiff then argued that the two regulations under Section 183 were invalid and essentially the Tax Court punted on that and said that it did not matter if they were invalid or not since their decision would be exactly the same.
Here is the actual wording on their decision:
