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Need Some Deductions for 2011?

Don't overlook these!

10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2011

Section 1244 - Losses on Small Business Stock

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Protecting Your Section 1244 Deduction

Should you own stock in a small corporation and the corporation suffers a business failure, its stock can become worthless.

Being able to deduct a loss on the stock as an ordinary loss, which is fully deductible, rather than a capital loss, which is limited to $3,000 a year, can save you a bundle in taxes.

However, without the appropriate records, the IRS can disallow ordinary loss treatment permitted under IRC Section 1244.

Don't let it happen!

If you set up a corporation, your corporate records must document the fact that the stock issued qualified as Section 1244 stock.

If audited, the IRS may inspect your corporate records to find reference to the fact that the stock qualified as Section 1244 stock.

Check the requirements for qualifying for Section 1244 stock.

Make reference to the fact that the corporation's stock qualified for classification as Section 1244 stock.

Provide a record of the corporation's gross receipts data for five years or whatever number of years the corporation has been in existence.

If you are the purchaser of stock of a small business corporation, you need to retain information about the shares you purchased.

Keep a record of the number of shares received, the date the stock was issued to you, and the price paid for the stock.