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 New Mexico, the "Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code" refers to the process by which the board of directors of a company can take action and make decisions without the need for a physical meeting. This method allows the board to adopt the Internal Revenue Service (IRS) code, which is a set of rules and regulations imposed by the IRS for tax purposes. By utilizing this written consent method, the board can expedite the decision-making process and bypass the necessity of organizing a formal meeting. Instead, the directors can provide their consent in writing, making it a convenient option when time or logistics are constraints. To initiate the action, a proposed resolution or consent form outlining the adoption or amendment of the IRS code is prepared. This document typically includes the specific provisions of the code that are being adopted or amended, along with any other relevant information. The consent form is then distributed to each member of the board of directors for their review and signature. It is essential to ensure that all directors receive the consent form and have sufficient time to review its contents before providing their consent. In order for the action to be valid, the written consent of all directors is required. Once every director has signed the consent form, it becomes effective as if it were approved during a regular board meeting. There may be different types of "Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code" depending on the specific provisions being adopted or amended. For instance, directors may use this action to adopt a new section of the IRS code related to taxation of foreign income, or to amend existing provisions regarding tax deductions and credits. The specific type of action would depend on the intent and purpose of the board. Overall, using the "Action of the Board of Directors by Written Consent in Lieu of Meeting to Adopt IRS Code" allows for a streamlined and efficient process of decision-making, enabling the board to adopt or amend relevant IRS code provisions without the need for a physical meeting.
