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.
Massachusetts Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code refers to a process through which the board of directors of a Massachusetts corporation can take action without holding a formal meeting. Instead, directors can provide their written consent to a proposed action, specifically the adoption of the IRS Code, thereby eliminating the need for a physical gathering. The IRS Code, which stands for the Internal Revenue Code, is a set of regulations and laws established by the Internal Revenue Service (IRS) in the United States. It governs various aspects of federal taxation, including income tax, estate tax, gift tax, and more. To adopt the IRS Code, the board of directors must review and accept its provisions, ensuring compliance with tax laws and regulations. In the case of Massachusetts corporations, the ability to take action by written consent without holding a meeting is facilitated by the state's corporate laws. The Massachusetts General Laws Chapter 156D, Section 8.21, permits directors to provide written consent as an alternative method of decision-making. Several types of Massachusetts Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code can take place. These may include: 1. Unanimous Written Consent: In this type, all directors of the Massachusetts corporation provide their written consent to adopt the IRS Code. Each director signifies their agreement by signing the written consent document, indicating their approval of the action. 2. Majority Written Consent: This type denotes that a majority of the directors, as stipulated by the corporation's bylaws or applicable laws, provide their written consent to adopt the IRS Code. The exact number or percentage required to form a majority may vary depending on the specific circumstances. 3. Written Consent of Less Than All Directors: In certain cases, a corporation may allow a specified number or specific group of directors to provide written consent, rather than requiring the unanimous or majority consent of all directors. This could happen if the corporation's bylaws or articles of organization outline such provisions. Regardless of the type of written consent adopted, the process typically involves the circulation of documents detailing the proposed action for directors' review. Upon reviewing the materials, directors individually sign their consent and return it to the corporation's secretary. These signed consents are then compiled, forming a written record of the board's action. It is essential to adhere to the specific requirements set forth in the Massachusetts General Laws and the corporation's governing documents when conducting an Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code. By doing so, Massachusetts corporations can ensure compliance with the necessary procedures while expediting decision-making processes.
