section 1244 - loss
Hi,
In 2002 I started an s-corp and used $100K of my own money to start a business and then 1 year later, in 2003 invested $24K to keep things going. After 7 years, I have decided to file my FINAL 1120s 2009 return to shut things down...I am essentially bankrupt and now need to pay off all this debt!! I was construction contractor.
I looked at my past 7 returns and it consisently shows my capital stock is worth $62k but my business is worth $0 after doing about $400K per year for about 5 of the 7 years.
After reading irs publications and web sites, I believe I qualify for the section 1244 loss of no more than $100K loss(filing jointly) on Form 4797. Since I now am W-2 employed, this loss will permit me to get all my income taxes back as a refund which will help my family emensely.
Do you think I'll be OK filing this?
Section 1244 Stock
TO: Anonymous
FROM: B.K.
DATE: April 6, 2010
RE: Section 1244 Stock
After reading your post, I do believe you may be able to qualify under Section 1244. This will enable you to use your loss on the sale or exchange of your Section 1244 stock to offset your ordinary income up to $100,000 for a married couple, or $50,000 for a single taxpayer. Since you mentioned the larger amount, I am assuming you are married filing jointly.
The most important thing to make sure about is that you pass all of these requirements for a Section 1244 small business stock. They are as follows:
1. The amount received by the corporation for stock and paid-in capital does not exceed $1,000,000.
2. The stock was paid for with only money or properties, not other stock or securities or services.
3. The stock is common or preferred stock.
4. The stock was issued by a domestic corporation.
5. A shareholder claiming a loss on the sale or exchange must have purchased the stock as an original issue and is an individual or partnership.
6. The corporation earned over 50% of its total gross receipts from sources other than annuities, dividends, interest, rents, royalties, or proceeds from sales or exchanges of securities for the period of five years before the year of the loss or since the inception of the corporation if less than five years of existence.
I would also make sure you have documentation to prove your stock meets all of these requirements. I wish you better luck in the future.
References
http://www.maxfilings.com/incorporation-knowledge-center/section-1244-stock.php
http://ezinearticles.com/?Planning-For-Losses-Under-Section-1244&id=2214358