Question

George bought 6,000 shares of Section 1244 stock from Dorado Corporation six years ago for $160,000. The company has not done well so this year George sold all of his stock for $45,000.

a. Determine the amount and type of George’s loss if he is single.

b. How would your answer change if George is married and files a joint return?

Answer 1

A) total loss on s1244 stock = $160000-$45000 = $115000

If he is single he can deduct $50000 as ordinary loss from is ordinary income and an additional $3000 as capital loss. Therefore total deduction he will get in current year will be of $53000. The remaining $62000 loss will have to be carried forward as capital loss and will be available for deduction in future years at the rate of $3000 per year if he has not capital gain.

B)

If george is married and files a joint return, than he can deduct $100000 as ordinary loss on the section 1244 stock. He will still have an additional $3000 capital loss deduction. Remaining $12000 will be carried forward as capital loss and will be allowed for deduction at $3000 per year