Section 1244 Stock Cannot Be Issued For
Description
How to fill out Agreement To Incorporate As An S Corp And As Small Business Corporation With Qualification For Section 1244 Stock?
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FAQ
Section 1244 stock is a stock transaction pursuant to the Internal Revenue Code provision that allows shareholders of an eligible small business corporation to treat up to $50,000 of losses (or, in the case of a husband and wife filing a joint return, $100,000) from the sale of stock as ordinary losses instead of ...
Qualifying for Section 1244 Stock The corporation's aggregate capital must not have exceeded $1 million when the stock was issued and the corporation cannot derive more than 50% of its income from passive investments. The shareholder must have purchased the stock and not received it as compensation.
Corporations, trusts, estates and trustees in bankruptcy are not eligible to claim a Section 1244 loss. A Section 1244 loss can be claimed only by an individual or partnership to whom the stock was issued and who has continuously held the stock until it is sold or is determined to be worthless.
1244 stock are deductible as ordinary losses up to a maximum of $50,000 per taxable year ($100,000 for married taxpayers filing a joint return), Any excess loss for the year is a capital loss. Gains on the sale of Sec. 1244 stock are capital gains.
1244 encourages new investment in small business by permitting investors to claim an ordinary (rather than a capital) loss on the disposition (including worthlessness) of qualifying small business stock. As an added benefit, any loss that qualifies as an ordinary loss under Sec.