The Importance of Stock Being Designated § 1244 Stock Is

question 26

Multiple Choice

The importance of stock being designated § 1244 stock is which of the following?

• A)Any loss on the stock is deductible as an ordinary loss.
• B)It can be sold by the shareholder at a premium because of the availability of the ordinary loss deduction to the new owner.
• C)The first $50,000 of each year's loss ($100,000 on a joint return) on the stock may be deducted as an ordinary loss.
• D)More than one but less than all of the above are true.
• E)All of the above are true.

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Definitions:

Capital Balance

The amount of money that investors have contributed to a company plus retained earnings, less any withdrawals.

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Bonus

Additional compensation given to employees as a reward for their performance, typically cash or stock options.

Withdraws

Funds taken out from a business by the owner(s) for personal use, also known as drawings.