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Back to basics: Section 1244 continued

Paul Clark
Paul Clark
Last updated: June 4, 2024
Venture south fallback

Section 1244 gets even shinier.

In usual capital loss situations, you really need capital gains to offset the losses against, because you can only take up to $3,000 in net capital loss in a given year. (You roll forward the rest to future years).

But under Section 1244, you don’t need capital gains to offset things against – you need ordinary income. Generally people have more of that, from work, interest income, and more liquid investments.

But here’s the extra benefit: you don’t even need that! You can take up to $50,000 in net ordinary loss in a given year (for a single filer; $100k if you are married-filing-jointly).

No-one likes to lose money on angel deals – but if you do Section 1244 makes your life a little better than if you had lost the same money on something else.