Loss on Sale of 1244 Stock

A Loss can count?

Fortunately, the tax law allows ordinary loss treatment on certain losses with respect to stock of small corporations (1244 stock). In general, this special treatment is only available if the following conditions are satisfied:

1. As of the time the stock was issued, the aggregate amount that was received by the issuing corporation for stock, as contributions to capital and as paid-in surplus, must not have exceeded $1 million.
2. The stock must have been issued for money or property (other than stock or securities). Thus, the stock can’t be issued as compensation for services.
3. For the five years before the year the loss was sustained, the corporation must not have received 50% or more of its receipts from certain passive sources.
4. The taxpayer claiming the special treatment must be an individual (including, if certain conditions are satisfied, individuals who claim the loss through holding an interest in a partnership that is selling the stock). The special treatment isn’t available to corporations, trusts or estates.
5. The stock must have been issued to the individual claiming the special treatment, or to the partnership through which the individual is claiming the special treatment, and held continuously by that individual (or partnership) to the time of sale.

Not every year

In any year, the total loss treated as ordinary under these rules can’t be more than $50,000 (or $100,000 if you file a joint return).

We hope you found this article about “Loss on Sale of 1244 Stock” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.

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Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

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