Loss from worthless 1244 Stock

[Long Island Tax Pro]

Client invested $160K in a startup that was closed mid 2019.

All investment is doomed. I see that 1244 stock needs to be reported on form 4797 line 10, but I cannot figure how to enter the information to the form.

Anyone with specific instructions on how to "flow" the data to the 4797?

Do I start on Sch D and then make a selection?

The idea is that 1244 stock is allowing $100K (MFJ) / $50K (single) deduction in the year of loss versus a $3,000 capital loss. So it is a huge difference.

Instructions or link to instructions are appreciated. 

[itonewbie]

Provided all the conditions were met and the stock became worthless in 2019 (since closure may not always equate to stocks becoming worthless), here's what you should do.

1. Under Sch D, click on the QuickZoom button for Capital Gain(Loss) Transaction Worksheet;
2. Click on the Create new copy radio button and enter a description;
3. Click on Create;
4. Under Part II, Line 1, check the box for (f) Section 1244 stock; and
5. Complete the relevant details on the screen.

$100k will flow to F.4797 as ordinary loss and the remainder will flow to F.8949/Sch D as LTCL.

[clayms1]

Okay.  That seems to work well on 2019 tax forms.  Now, the forms have changed and I cannot find where to limit the Ord Loss from sale of Section 1244 Stock.  The loss is $235,000...but, the Ordinary loss limitation is $100,000.  How/Where do I make that split on Proseries Forms?

Thank you!

[tccpg289]

Does anything need to be done on the C-Corp to take the loss? Or only on the individual return?

[qbteachmt]

@tccpg289 

It isn't clear if you are asking because of the defunct corp, or the shareholders, or? You might want to start a new topic, since this is from June 2020, put your Title, put details in the input panel, and put that in the forum section for the program you are using.

[hedgeslaw]

Now that the input sheets have changed, this is how I entered the loss and designated part of it as a 1244 stock ordinary loss.

1. Press F6 for the forms list and type "FB" to goto the Form 1099B-wks (Weird, but start here)

2.  Go down to the Quick Entry Table and enter the company name, the sale date, acquired date, full sales price, cost, enter "F" as the 8949 code, enter $100,000 in the adjmt box for your Sec 1244 Adjmt and enter "S" as the adjustment code.

3. Now, just double click on any of the boxes in which you entered info ... For example, double click on the Date Acquired box.

4. That double click opens the Capital Gains Adjustment Worksheet. Scroll to the bottom of that worksheet (PART IV) and check the box entitled "Check if ordinary gain/loss" and then enter your $100,000 in the box entitled "Sec 1244 Loss Form 4797" in the lower right corner.

5. To verify your work, goto Form 4797 Part II Ordinary Gains and Loss and you will see the entry for your 1244 stock and the $100,000 loss is entered as an ordinary loss. Now goto the Form 8949 and verify the selling price, basis and $100,000 basis adjmt is entered as a long term capital gain (less the $100k)