Q, who is single, acquired § 1244 stock of XYZ Corporation several years ago for $150,000.During the current year, Q sold the XYZ stock for $20,000.Q also realized a $10,000 long-term capital gain during the year from a separate transaction.Q's taxable income, excluding both of these transactions, is $70,000 (after personal and dependency exemptions).Q's taxable income including these transactions is how much?

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Q can deduct the loss on § 1244 stock as an ordinary loss up to $50,000. The loss is $130,000 ($150,000 - $20,000), so Q can deduct $50,000 as an ordinary loss. The remaining $80,000 is a capital loss, which can offset the $10,000 capital gain, leaving a $70,000 capital loss. Only $3,000 of this can be deducted against ordinary income. Therefore, Q's taxable income is $70,000 - $50,000 - $3,000 = $17,000.

Q, Who Is Single, Acquired § 1244 Stock of XYZ