Other People's Money
Back to library
Tax

§1244 Small Business Stock Ordinary-Loss Election

Convert up to $100K ($50K single) of stock losses from capital to ordinary — huge tax savings if the startup fails.

Overview

IRC §1244 lets original-issue shareholders of qualifying domestic small business corps (paid-in capital ≤$1M) treat losses on their stock as ORDINARY (up to $100K MFJ / $50K single per year) instead of capital. Ordinary losses offset W-2, 1099, and business income — worth 3–5× a capital loss in real tax value. No election required, just proper documentation at issuance. Every founder should structure formation to preserve §1244.

Best fit
Founders funding startups from savingsAngel investors in first-round C-corpsAnyone taking real cash risk on a new corp
Estimated impact
$25K–$37K/yr additional refund if the venture fails

Click Generate advisory deep dive for mechanics, IRC citations, a step-by-step execution plan, a worked numeric example on your profile, costs, risks, and this-week actions.

More tax strategies

See all Tax strategies
OPM