RONALD J. CAPPUCCIO, JD, LLM (TAX)


TAX, BUSINESS AND ESTATE ATTORNEY

QUESTIONS
856.665.2121

Section 1244 Stock

Small Corporations Should Elect Section 1244 Stock to deduct losses on personal Income Taxes.

Owners of New Business Corporations, whether the are regular "C" corporations or "S" xoprorations, can only deduct if the company folds as capital losses. If the shareholder's losses exceed capital gains.,only $3000 per year can be deducted against ordinary income. Internal Revenue Code Section 1244 permits shareholders to elect to have these losses deducted as ordinary income.

In order to Qualify for Section 1244 Treatment, the shareholders must meet certain requirements. These "small business corporation" requirements include :

  1. The entity must be a corporation;
  2. total capital invested in the business cannot exceed $1 million.;
  3. Section 1244 stock is limited to a yearly loss of $100,000 ($50,000 if filing as single;)
  4. The business must be an operating company and not just a shell or holding company.This means the corporation cannot earn all of its income from investments but must actually perform some business or profession.

No one goes into busines with the idea of losing money, but if you do lose your investment, the Section 1244 election can give you ordinary losses. If you have a querstion about setting-up your business Call me at (856) 665-2121 today!