Assuming both investments become worthless after three years, a married individual investing in a corporation would be indifferent to whether he receives a $20,000 note or $20,000 of § 1244 stock in exchange for a $20,000 transfer.

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If the investments become worthless after three years, the individual would benefit from receiving the § 1244 stock as it qualifies for ordinary loss treatment under the tax code, allowing for a deduction of up to $50,000 of ordinary income per year for single filers and $100,000 for married couples filing jointly. The $20,000 note would not qualify for this tax benefit.

Assuming Both Investments Become Worthless After Three Years, a Married