In January of last year Debbie single established a corporat

In January of last year, Debbie, single, established a corporation and acquired Section 1244 stock. This year the stock, which had a basis of $120,000, became worthless. Debbie had no other property transactions during the year. How much will Debbie\'s adjusted gross income decrease by because of these transactions? A) $3,000, B) $50,000, C) $53,000, D) $103,000. ***Another posted answer was $50,000. Why isn\'t this $53,000?***

Solution

Answer: The annual deduction in respect of sec.1244 ordinary loss can be claimed upto $50,000 in case of single taxpayer.

Therefore, Option (B)$50,000 is the correct answer.

However, if the potential loss exceeds the $50,000 limit (As in the given case) then the stock should be disposed off, in more than one year, if Debbie wants to maximize the ordinary loss treatment.