Small Business (Section 1244) Stock

Report an ordinary loss from the sale, exchange, or worthlessness of small business (section 1244) stock on Form 4797. However, if the total loss is more than the maximum amount that can be treated as an ordinary loss for the year ($50,000 or, on a joint return, $100,000), also report the transaction on Form 8949 as follows.

In column (a), enter “Capital portion of section 1244 stock loss.”

Complete columns (b) and (c) as you normally would.

In column (d), enter the entire sales price of the stock sold.

In column (e), enter the entire basis of the stock sold.

Enter “S” in column (f). See the Instructions for Form 8949, columns (f), (g), and (h).

In column (g), enter the loss you claimed on Form 4797 for this transaction. Enter it as a positive number.

Complete column (h) according to its instructions.

Report the transaction in Part I or Part II of Form 8949 (depending on how long you held the stock) with the appropriate box checked.

Example.

You sold section 1244 stock for $1,000. Your basis was $60,000. You had held the stock for 3 years. You can claim $50,000 of your loss as an ordinary loss on Form 4797. To claim the rest of the loss on Form 8949, check the appropriate box at the top. Enter $1,000 on Form 8949, Part II, column (d). Enter $60,000 in column (e). Enter “S” in column (f) and $50,000 (the ordinary loss claimed on Form 4797) in column (g). In column (h), enter ($9,000) ($1,000 − $60,000 + $50,000). Put it in parentheses to show it is a negative amount.