Chapter 8: Other Deductions, Penalties, and Loss Disallowance

01.Core Concepts

• Stock may be classified as Section 1244 stock if: • It is held by an original investor in the company. • The initial capitalization of the company was $1 million or less. • Tax Treatment • If sold at a loss:  The first $50,000 ($100,000 for MFJ) each year is treated as an ordinary loss.  Excess losses for the year follow normal capital loss rules. • Section 1244 does not apply to gains.