Owners
of New Business Corporations, whether the are regular "C" corporations
or "S" xoprorations, can only deduct if the company folds as
capital losses. If the shareholder's losses exceed capital gains.,only
$3000 per year can be deducted against ordinary income.
Internal Revenue Code Section 1244 permits shareholders to
elect to have these losses deducted as ordinary income.
In order to Qualify
for Section
1244 Treatment, the
shareholders must meet certain requirements. These "small
business corporation" requirements include :
1. The entity must be a corporation;
2. total capital invested in the business cannot exceed $1 million.;
3. Section 1244 stock is limited to a yearly
loss of $100,000 ($50,000 if
filing as single;)
4. The business must be an operating
company and not just a shell
or holding company.This
means the corporation cannot earn all of its income from investments
but must actually perform some business or profession.
No one
goes into busines with the idea of losing money, but if you do lose
your investment, the Section 1244 election can give you ordinary loses.
If you
have a querstion
about setting-up your business
Call me
at (856)
665-2121 today!
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