On May 9, 2013, Calvin acquired 250 shares of stock in Aero Corporation, a new startup company, for $68,750. Calvin acquired the stock directly from Aero, and it is classified as §1244 stock (at the time Calvin acquired his stock, the corporation had $900,000 of paid-in capital). On January 15, 2015, Calvin sold all of his Aero stock for $7,000. Assuming that Calvin is single, determine his tax consequences as a result of this sale.

Question

Sergio Avery

Business

23 July, 09:09

On May 9, 2013, Calvin acquired 250 shares of stock in Aero Corporation, a new startup company, for $68,750. Calvin acquired the stock directly from Aero, and it is classified as §1244 stock (at the time Calvin acquired his stock, the corporation had $900,000 of paid-in capital). On January 15, 2015, Calvin sold all of his Aero stock for $7,000. Assuming that Calvin is single, determine his tax consequences as a result of this sale.

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Answers (1)

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Jane Simmons · Answer 1

tax consequences = $11750

Explanation:

given data

Calvin acquired = 250 shares

startup company = $68,750

paid-in capital = $900,000

Calvin sold = $7,000

solution

we know Conditions according to Section 1244 that is Applicable for the Small Business Stock is here as

(a) Stock is directly purchase from the corporation

(b) Ordinary Loss Treatment is limited to the $50000 or $100000 for the Joint filing

(c) Loss may be from the sale of stock or the worthless stock

(d) and more than $50000 loss is treated capital loss

so here we know that

Calvin Ordinary Loss would be = $50000

remaining loss = $11,750

long term capital loss will be = $68750 - $7000

long term capital loss = 61750

tax consequences = $61750 - 50000

tax consequences = $11750