Treasury Regulations (26 C.F.R.)
26 CFR § 1.1244(d)-2
Increases in basis of section 1244 stock.
# (a) In general.
If subsequent to the time of its issuance there is for any reason, including the operation of section 1376(a), an increase in the basis of section 1244 stock, such increase shall be treated as allocable to stock which is not section 1244 stock. Therefore, a loss on stock, the basis of which has been increased subsequent to its issuance, must be apportioned between the part that qualifies as section 1244 stock and the part that does not so qualify. Only the loss apportioned to the part that so qualifies may be treated as an ordinary loss pursuant to section 1244. The amount of loss apportioned to the part that qualifies is the amount which bears the same ratio to the total loss as the basis of the stock which is treated as allocated to section 1244 stock bears to the total basis of the stock.
# (b) Example.
The provisions of paragraph (a) of this section may be illustrated by the following example:
Example:
For $10,000 a corporation issues 100 shares of section 1244 stock to X. X later contributes $2,000 to the capital of the corporation and this increases the total basis of his 100 shares to $12,000. Subsequently, he sells the 100 shares for $9,000. Of the $3,000 loss, $2,500 is allocated to the portion of the stock that qualifies as section 1244 stock ($10,000/$12,000 of $3,000), and the remaining $500 is allocated to the portion of the stock that does not so qualify. Therefore, to the extent of $2,500, the loss may be treated as an ordinary loss assuming the various requirements of section 1244 stock are satisfied. However, the remaining $500 loss must be treated as a capital loss.
[T.D. 6495, 25 FR 9680, Oct. 8, 1960]
Source: view the official text
In this part (40 sections)
- 1.1234-1 · Options to buy or sell.
- 1.1234-2 · Special rule for grantors of straddles applicable to certain…
- 1.1234-3 · Special rules for the treatment of grantors of certain…
- 1.1234-4 · Hedging transactions.
- 1.1235-1 · Sale or exchange of patents.
- 1.1235-2 · Definition of terms.
- 1.1236-1 · Dealers in securities.
- 1.1237-1 · Real property subdivided for sale.
- 1.1238-1 · Amortization in excess of depreciation.
- 1.1239-1 · Gain from sale or exchange of depreciable property between…
- 1.1239-2 · Gain from sale or exchange of depreciable property between…
- 1.1240-1 · Capital gains treatment of certain termination payments.
- 1.1241-1 · Cancellation of lease or distributor's agreement.
- 1.1242-1 · Losses on small business investment company stock.
- 1.1243-1 · Loss of small business investment company.
- 1.1244(a)-1 · Loss on small business stock treated as ordinary loss.
- 1.1244(b)-1 · Annual limitation.
- 1.1244(c)-1 · Section 1244 stock defined.
- 1.1244(c)-2 · Small business corporation defined.
- 1.1244(d)-1 · Contributions of property having basis in excess of value.
- 1.1244(d)-2 · Increases in basis of section 1244 stock.
- 1.1244(d)-3 · Stock dividend, recapitalizations, changes in name, etc.
- 1.1244(d)-4 · Net operating loss deduction.
- 1.1244(e)-1 · Records to be kept.
- 1.1245-1 · General rule for treatment of gain from dispositions of…
- 1.1245-2 · Definition of recomputed basis.
- 1.1245-3 · Definition of section 1245 property.
- 1.1245-4 · Exceptions and limitations.
- 1.1245-5 · Adjustments to basis.
- 1.1245-6 · Relation of section 1245 to other sections.
- 1.1248-1 · Treatment of gain from certain sales or exchanges of stock…
- 1.1248-2 · Earnings and profits attributable to a block of stock in…
- 1.1248-3 · Earnings and profits attributable to stock in complex cases.
- 1.1248-4 · Limitation on tax applicable to individuals.
- 1.1248-5 · Stock ownership requirements for less developed country…
- 1.1248-6 · Sale or exchange of stock in certain domestic corporations.
- 1.1248-7 · Taxpayer to establish earnings and profits and foreign taxes.
- 1.1248-8 · Earnings and profits attributable to stock following certain…
- 1.1248(f)-1 · Certain nonrecognition distributions.
- 1.1248(f)-2 · Exceptions for certain distributions and attribution…