How do you report a Section 1244 loss?
To report a Section 1244 loss on your taxes input the loss on line 10 column (a) and the allowable loss in column (g) of Form 4797 and any excess loss is reported on Schedule D and Form 8949. Read More
QSBS Basics
What is the impact on taxes with and without Section 1244?
Generally, capital losses can only be taken against capital gains with a limit of $3k annually against ordinary income. There is a material tax difference between allowing the losses against ordinary income vs. capital gains due to the tax rates. Below is an example with and without … Read More
How are Qualified Small Businesses similar and different between Sections 1202 and 1244?
If you are familiar with the definition of a qualified small business per Section 1202 there are a few nuances with Section 1244 as well as the methods of acquiring the stock. The difference between Section 1202 (not an exhaustive list) and 1244 are below: Read More
How might other Biden tax stimulus policies impact QSBS?
Long-term capital gains are generally taxed at a maximum rate of 20% plus the 3.8% net investment income tax (NIIT). One Biden administration proposal would replace these rates with ordinary income rates for taxpayers earning more than $1,000,000. This could cause higher earners to pay as much … Read More
Does the Biden tax policy and stimulus support the QSBS exemption?
Maybe the best place to look to predict the Biden administration’s approach to QSBS are the policies enacted under the Obama administration. The Obama administration enacted two pieces of legislation impacting QSBS: Small Business Jobs Act of 2010 (“2010 SBJA”) – prior to 2010, the QSBS exclusion was raised … Read More
How may the Biden Tax Legislative Agenda and Stimulus Impact QSBS?
Among the many questions regarding changes that will be implemented by the Biden administration are the potential for changes to tax policy. The tax plan released by Biden before the election included a number of policies that would raise taxes on individuals with income above $400,000, including raising … Read More
Section 1244 Unlocks Ordinary Loss Treatment for Qualified Small(er) Businesses
Section 1244 losses from certain small business stock allows an individual or married taxpayer to take a $50k or $100k capital loss, respectively, as an ordinary loss annually. How are Qualified Small Businesses similar and different between Sections 1202 and 1244? What is the impact on taxes with … Read More
Section 1244 of the Tax Code
§ 1244. Losses on small business stock General rule In the case of an individual, a loss on section 1244 stock issued to such individual or to a partnership which would (but for this section) be treated as a loss from the sale or exchange of a capital asset … Read More
What Date Did I Acquire the QSBS?
If the stock was acquired directly from the qualifying QSBS corporation at the original issue, the acquisition date for QSBS purposes is the purchase date. However, the acquisition date for QSBS purposes varies if the QSBS was received in another way, such as compensation for services performed, … Read More
What if my QSBS gain exceeds the limitations?
If a taxpayer’s capital gains exceed the QSBS limitations, the gain above the limitation will be subject to capital gains taxes at a maximum rate of 28%. Additionally, the additional gains could be subject to Net Investment Income Tax (NIIT) of 3.8% for high earning taxpayers. As an example, ABC, Inc. issued $2 … Read More