Samuel Reese sold 1,000 shares of his stock in Maroon, Inc., an S corporation. H

Question

Samuel Reese sold 1,000 shares of his stock in Maroon, Inc., an S corporation. He sold the stock for $15,700 after he had owned it for six years. Samuel had paid $141,250 for the stock, which was issued under § 1244. Samuel is married and separately owns the 1,000 shares. Assume Samuel and his wife file a joint tax return.

Complete the statement below that outlines the the appropriate Federal income tax treatment of any gain or loss on the stock sale.

Samuel Reese recognizes a loss of $________, of which $_________ is an ordinary § 1244 deduction and $________ is a long-term capital loss.

Explanation / Answer

1) A loss of $125,550 of which $100,000 and $25,550

Explanation:

Samuel Reese recognizes a loss of $ 125,550

Samuel paid (Purchase) = $141,250  

Less

Samuel sold=$15,700

_____________________

Recognizes Loss $125,550

____________________________________________

$100,000 is an ordinary loss of § 1244 deduction can be taken by married as well as jointly filled tax return payers

____________________________________________

Long-term capital loss= $125,550 - $100,000 = $25,550

____________________________________________

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