Question

For the current year, Brad and Janet, a married couple filing jointly, has a $120,000 long-term loss on the sale of qualifying Section 1244 stock, their only capital asset transaction of the year. Their AGI, before the loss, is $300,000. What is their AGI after taking into account the stock loss?

Answer 1

AGI befor loss : 300,000

Allowable deduction for loss specified in 1244 stock (50,000x2) = 100,000

AGI after Loss (300,000-100,000) = 200,000

Explanation

Section 1244 stock refers to the tax treatment of restricted stock by the IRS. Section 1244 of the tax code allows losses from the sale of shares of small, domestic corporations to be deducted as ordinary losses instead of as capital losses up to a maximum of $50,000 for individual tax returns or $100,000 for joint returns.