Bennett owns all of the outstanding stock of Bennett Company.In 2013 Bennett sells all of his stock in the company for $30,000.If the stock qualifies as Section 1244,Bennett is single,and his basis in the stock is $140,000,how is his loss on the sale classified for tax purposes?
A)$110,000 capital loss
B)$110,000 ordinary loss
C)$60,000 capital loss;$50,000 ordinary loss
D)$100,000 ordinary loss;$10,000 capital loss
E)None of the above

Question

Quizplus · Accepted Answer

Since the stock qualifies as Section 1244, a loss on the sale is treated as an ordinary loss rather than a capital loss. Bennett's basis in the stock is $140,000, but he sold it for only $30,000, resulting in a loss of $110,000. Therefore, his loss on the sale is an ordinary loss of $110,000.

Bennett Owns All of the Outstanding Stock of Bennett Company