Louisiana Agreement to Incorporate as an S Corp and as Small Business Corporation with Qualification for Section 1244 Stock
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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
Qualifying for Section 1244 StockThe shareholder must have purchased the stock and not received it as compensation. Only individual shareholders who purchase the stock directly from the company qualify for the special tax treatment. A majority of the corporation's revenues must come directly from operations.
Section 1244 stock is common or preferred stock issued for money or other property by a domestic small business corporation (which can be a C or S corporation) that meets a gross receipts test. Common stock does not include securities convertible into common stock, nor common stock convertible into other securities.
An ordinary loss from the sale or worthlessness of Section 1244 stock is reported on Form 4797, and if the total loss exceeds the maximum amount that can be treated as an ordinary loss for the year, the transaction should also be reported on Form 8949.
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
1244 stock is issued to S corporations, such corporations and their shareholders may not treat losses on such stock as ordinary losses. This is so notwithstanding IRC Sec. 1363, which provides that the taxable income of an S corporation must be computed in the same manner as that of an individual.
Section 1244 of the Internal Revenue Code allows eligible shareholders of domestic small business corporations to deduct a loss on the disposal of such stock as an ordinary loss rather than a capital loss. Eligible investors include individuals, partnerships and LLCs taxed as partnerships.
1244(b)). Any loss in excess of the limit is a capital loss, subject to the capital loss rules. Thus, if the potential loss exceeds the $50,000 (or $100,000) limit, the stock should be disposed of in more than one year to maximize the ordinary loss treatment.
Qualifying for Section 1244 StockThe stock must be issued by U.S. corporations and can be either a common or preferred 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.More items...