Identify which of the following statements is true.
A)A loss recognized by a shareholder upon complete liquidation of a corporation may not qualify for ordinary loss treatment if the stock is Sec. 1244 stock.
B)The loss that is recognized by an individual shareholder on the liquidation of a corporation is a capital loss, up to certain limits, if the stock is Sec. 1244 stock.
C)The loss recognized by a corporate shareholder on the worthlessness of the controlled subsidiary's stock is an ordinary loss.
D)All of the above are false.

Question

Quizplus · Accepted Answer

The loss recognized by a corporate shareholder on the worthlessness of the controlled subsidiary's stock is indeed an ordinary loss. Option A is incorrect because if the stock is Sec. 1244 stock, the loss recognized by a shareholder upon complete liquidation of a corporation may qualify for ordinary loss treatment. Option B is incorrect because the loss recognized by an individual shareholder on the liquidation of a corporation may be a capital loss, up to certain limits, but this has no relation to whether the stock is Sec. 1244 stock or not.

Identify Which of the Following Statements Is True