Section 1244 Stock

AAA

DEFINITION of 'Section 1244 Stock'

A type of equity named after the portion of the Internal Revenue Code that describes its treatment under tax law. 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.

INVESTOPEDIA EXPLAINS 'Section 1244 Stock'

To qualify for section 1244 treatment, the corporation, the stock and the shareholders must meet certain requirements. The corporation's aggregate capital must not have exceeded $1 million when the stock was issued and the corporation must not derive more than 50% of its income from passive investments. The shareholder must have paid for the stock and not received it as compensation, and only individual shareholders who purchase the stock directly from the company qualify for the special tax treatment. This is a simplified overview of section 1244 rules; because the rules are complex, individuals are advised to consult a tax professional for assistance with this matter.

RELATED TERMS
  1. Restricted Stock

    Insider holdings that are under some other kind of sales restriction. ...
  2. Common Stock Equivalent

    Securities such as stock options, warrants, preferred bonds, ...
  3. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  4. Section 1041

    A section of the Internal Revenue Code that mandates that any ...
  5. Unrecaptured Section 1250 Gain

    A type of depreciation-recapture income that is realized on the ...
  6. Common Stock

    A security that represents ownership in a corporation. Holders ...
Related Articles
  1. Markets

    The 4 Basic Elements Of Stock Value

    Investors use these four measures to determine a stock's worth. Find out how to use them.
  2. Options & Futures

    Finding Undiscovered Stocks

    Wall Street tends to focus on large cap stocks, leaving other stocks under-followed and undervalued.
  3. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  4. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  5. Retirement

    Stock Ratings: The Good, The Bad And The Ugly

    Stock ratings are both loved and reviled. Find out why they deserve equal measures of both.
  6. Savings

    How Microeconomics Affects Everyday Life

    Microeconomics is the study of how individuals and businesses make decisions to maximize satisfaction. Microeconomic principles can describe many everyday experiences. We use renting a New York ...
  7. Taxes

    Switzerland's Declining Tax Haven Appeal

    Switzerland's tax haven allure is being threatened by efforts by the US and other governments to make Swiss banks give up their much-vaunted secrecy.
  8. Taxes

    Are You Missing Out On These Tax Exemptions?

    To lower your tax bill, make sure that you're taking all the exemptions that apply to you.
  9. Economics

    Venezuela Teeters On Edge As Oil Revenues Shrink

    Low oil prices have drastically revised the economic status quo -- dealing a destabilizing blow to oil-exporters like Venezuela due to falling oil revenue.
  10. Economics

    What Must The UK Do To Keep North Sea Oil Afloat?

    The UK government may need to take drastic action to ensure the viability of UK North Sea offshore oil production amid high costs and shrinking margins.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center