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Need Some Deductions for 2011?

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10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2011

Section 1244 - Losses on Small Business Stock

Deducting a Loss on Small Business Stock-Section 1244

Reminder: If you need a refresher on the difference between an ordinary loss and a capital loss click here.

IRC Section 1244 pertains to the tax treatment of losses on small business stock issued by a corporation.

Only individuals may claim an ordinary loss deduction on Section 1244 stock.

See the rules on who can claim an ordinary loss deduction on Section 1244 stock.

The Tax Benefit Under Section 1244

Being allowed to deduct a loss on Section 1244 stock as an ordinary loss rather than a capital loss is the tax benefit.

If you own stock in a qualifying small corporation and the business fails causing its stock to become worthless, you can claim an ordinary loss, up to certain limits, against your other sources of income.

You must be the original purchaser of the stock to qualify for ordinary loss treatment.

An ordinary loss is more beneficial than a capital loss because it is fully (100%) deductible in a tax year.

A capital loss is only deductible up to a maximum of $3,000 per year. Any excess capital loss over $3,000 must be carried over to the next tax year.

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Section 1244 - Losses on Small Business Stock: Who Can Claim an Ordinary Loss on Section 1244 Stock? Where to Claim a Section 1244 Loss

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