The effect of § 1244 may be to convert a capital loss into an ordinary loss deductible for adjusted gross income.

Question

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According to section 1244 of the Internal Revenue Code, if a small business corporation's stock meets certain requirements and is sold at a loss, the loss may be treated as an ordinary loss rather than a capital loss. This means that the loss can be deducted from adjusted gross income, which can provide a greater tax benefit than a capital loss deduction.

The Effect of § 1244 May Be to Convert a Capital