Section 1244 Loss

Special rules may limit the amount of your ordinary loss if a you received section 1244 stock in exchange for property with a basis in excess of its fmv or b your stock basis increased because of contributions to capital or otherwise.

Section 1244 loss. B maximum amount for any taxable yearfor any taxable year the aggregate amount treated by the taxpayer by reason of this section as an ordinary loss shall not exceed. In the case of an individual a loss on section 1244 stock issued to such individual or to a partnership which would but for this section be treated as a loss from the sale or exchange of a capital asset shall to the extent provided in this section be treated as an ordinary loss. Section 1244 stock refers to the tax treatment of restricted stock by the irs.

In contrast capital losses are subject to an annual deduction limit of only 3 000. Section 1244 of the internal revenue code is the small business stock provision enacted to allow shareholders of domestic small business corporations to deduct a loss on the disposal of such stock as an ordinary loss rather than as a capital loss which is limited to only 3 000 annually. 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.

In the case of an individual a loss on section 1244 stock issued to such individual or to a partnership which would but for this section be treated as a loss from the sale or exchange of a capital asset shall to the extent provided in this section be treated as an ordinary loss. Up to 100 000 of the loss on section 1244 stock may be claimed as an ordinary loss by married individuals filing a joint return even if only one spouse owns the stock. In the case of an individual a loss on section 1244 stock issued to such individual or to a partnership which would but for this section be treated as a loss from the sale or exchange of a capital asset shall to the extent provided in this section be treated as an ordinary loss.

An annual limitation is imposed on the amount of sec. Any loss in excess of the limit is a capital loss subject to the capital loss rules. Section 1244 of the internal revenue code the small business stock provision was enacted to allow shareholders of domestic small business corporations to deduct as ordinary losses losses sustained when they dispose of their small business stock.

550 for more details including information on what is section 1244 small business stock. Section 1244 of the tax code allows losses from the sale of shares of small domestic corporations to be deducted as. 1244 ordinary loss that is deductible.

The maximum deductible loss is 50 000 per year 100 000 if a joint return is filed sec. Any excess loss over 50 000 is treated as a capital loss and must comply with the rules for capital losses. 1244 b maximum amount for any taxable year.