A section 1244 stock is a type of equity named after the portion of the Internal Revenue Code that describes its treatment under tax law. Section 1244 of the tax code allows losses from the sale of shares of small, domestic corporations to be deducted as ordinary losses instead of as capital losses up to a maximum of $50,000 for individual tax returns or $100,000 for joint returns.
To qualify for section 1244 treatment, the corporation, the stock and the shareholders must meet certain requirements. The corporation's aggregate capital must not have exceeded $1 million when the stock was issued and the corporation must not derive more than 50% of its income from passive investments. The shareholder must have paid for the stock and not received it as compensation, and only individual shareholders who purchase the stock directly from the company qualify for the special tax treatment. This is a simplified overview of section 1244 rules; because the rules are complex, individuals are advised to consult a tax professional for assistance with this matter.
In Indiana, the "Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code" refers to a method by which the board of directors of an organization can make decisions and adopt the Internal Revenue Service (IRS) Code without holding a physical meeting. This process allows for efficient decision-making while avoiding the need for all board members to physically gather. The board of directors, which consists of individuals elected to govern and oversee the organization, can execute this action by providing written consent in lieu of a formal meeting. The primary purpose of this action is typically to adopt or conform to the rules and regulations set forth by the IRS Code, ensuring compliance and eligibility for various tax benefits. The written consent required for this action should explicitly state the proposed decision, which in this case is the adoption of the IRS Code provisions. The consent must be signed by all directors who are entitled to vote on the matter. Each director is typically provided a copy of the consent document, which they review and sign in agreement with the proposed decision. Once all directors have signed the written consent, it is collected and maintained as an official record of the organization. The date on which the consent was signed by the last director required to approve the decision is considered the effective date of the action. This date is crucial for determining when the adopted IRS Code provisions become applicable to the organization. It is worth mentioning that the exact process for the "Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code" may vary depending on the specific organization and its bylaws. Therefore, it is recommended to consult with legal experts or refer to the organization's specific governing documents for precise procedures and requirements. In summary, the "Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code" in Indiana allows the board of directors to adopt the IRS Code provisions without holding a physical meeting. By obtaining written consent from all relevant directors, the organization ensures compliance and eligibility for various tax benefits.
