What is Section 1244 stock?
In short
A loss on section 1244 stock, stock of a small business corporation issued to an individual, is an ordinary loss up to $50,000 a year ($100,000 on a joint return) rather than a capital loss.
Key takeaways
- Only the original individual holder qualifies, not someone who bought the shares from them.
- The corporation's capital contributions can't have exceeded $1,000,000 when the stock was issued.
- Losses above the limit, and all gains, are capital.
Where it's tested
REG: Property Transactions: Gains, Losses & Like-Kind Exchanges — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A business sells equipment for $55,000. Original cost was $50,000 and accumulated depreciation was $30,000. How is the gain characterized?