Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Who Can Claim an Ordinary Loss on Section 1244 Stock?
Only individuals who originally purchased the stock may claim an ordinary loss on Section 1244 stock rather than a capital loss. If you received the stock by gift, inheritance, or purchased it from an original purchaser, you cannot claim an ordinary loss deduction on Section 1244 stock.
The Tax Advantage of Section 1244 Stock
Unmarried Individuals:
A loss on Section 1244 stock of up to $50,000 may be claimed by unmarried individuals as an ordinary loss. This means 100% of the loss is immediately deductible. In contrast, under the rules for net capital losses, only up $3,000 may be deducted in any given year and any excess over $3,000 must be carried forward.
Married individuals:
A loss on Section 1244 stock of up to $100,000 may be claimed by married individuals filing jointly, even if only one spouse owns the stock.
Partnerships
If a partnership entity purchases Section 1244 stock of another company, and later disposes of the stock at a loss, the partnership entity may pass the loss through to its partners. For a partner to be allowed to claim the loss as an ordinary loss instead of a capital loss, the partner must have been a partner when the stock was issued and has remained a partner until the time of the loss.
h6>Caution!If the partnership entity owns Section 1244 stock and distributes the stock to its partners, they may not claim an ordinary loss on the disposition (i.e. sale) of the stock. Instead, capital loss treatment would apply
S corporations
Although S corporations and partnerships are pass-through entities, the owners of these entities (shareholders and partners) are treated differently when it comes to deducting a loss on Section 1244 stock that is passed through the entity to them.
Tax treatment of Section 1244 loss for Partnerships vs S corporations
As mentioned earlier, when the partnership entity owns Section 1244 stock and passes a loss on the stock to its partners, they generally get to deduct the loss as an ordinary loss on their individual income tax return.
However, this is not the case for S corporation shareholders. If an S corporation owns Section 1244 stock and passes a loss on the stock to its shareholders, they may not deduct the loss as an ordinary loss. Instead, they must comply to the rules for deducting net capital losses. The tax treatment for deducting Section 1244 stock losses for partners and S corporation shareholders is an important distinction.
Where to Claim a Section 1244 Loss
Form 4797, Sales of Business Property, is used to report an ordinary loss on the sale of Section 1244 stock or a loss resulting from the stock becoming worthless. Attach Form 4797 to Form 1040.