Several years ago,John purchased 2,000 shares of § 1244 stock from Red Corporation for $40,000.Last year,John sold one-half of his Red Corporation stock to Mike for $12,000.During the current year,Mike sold the Red Corporation stock for $3,000.Mike has a $9,000 ($3,000 - $12,000)ordinary loss for the current year.

Question

Quizplus · Accepted Answer

Mike's loss is a capital loss, not an ordinary loss, because he did not acquire the stock directly from the corporation as § 1244 stock.

Several Years Ago,John Purchased 2,000 Shares of § 1244 Stock