ExpertEasy1 markMultiple Choice
CPA · Question 67 · Area IV: Property Transactions
A single taxpayer sells §1244 small business stock for a loss of $60,000. They have no other capital transactions. How is the loss treated?
A single taxpayer sells §1244 small business stock for a loss of $60,000. They have no other capital transactions. How is the loss treated?
Answer options:
A.
$60,000 Capital Loss (limited to $3,000 deduction).
B.
$60,000 Ordinary Loss.
C.
$50,000 Ordinary Loss, $10,000 Capital Loss.
D.
$3,000 Ordinary Loss, $57,000 Capital Loss.
How to approach this question
IRC §1244 allows ordinary loss treatment. Limit for Single: $50,000 (Married: $100,000). Excess is capital loss. $60k Total -> $50k Ordinary, $10k Capital.
Full Answer
C.$50,000 Ordinary Loss, $10,000 Capital Loss.✓ Correct
C
IRC §1244(b). Maximum ordinary loss for a single taxpayer is $50,000. The remaining $10,000 is treated as a capital loss.
Common mistakes
Using the married limit ($100k) for a single taxpayer.
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