This review list is offered to educate you on the subject of this document and to aid you in its preparation. This contract permits the investors to write their shares off as an ordinary expenditure, and not under capital gains, should the transaction go down and become worthless. It has no risk. Do it.
- Make numerous copies. Keep them in the business records and make them available, if needed, to the shareholders.
1244 Stock Approval by Board
MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS TO ADOPT STOCK OWNERSHIP PLAN UNDER SECTION 1244 OF THE INTERNAL REVENUE CODE
A special meeting of the Board of Directors of the ___________________________________
was held by virtue of notice on ___________, 20__ at _____ am/pm, at ____________________________, ______________, _______________
A motion was made and seconded as follows:
The Board of Directors have determined that the Corporation shall be organized and managed so that it is a “Small Business Corporation” as defined in IRC Sec. 1244 (1), as amended, and so that the shares issued by the Corporation are “Section 1244 Stock” as defined in IRC Sec. 1244 ©(1), as amended. Compliance with this section will enable shareholders to treat the loss on the sale or exchange of their shares as an “ordinary loss” on their personal income tax returns.
RESOLVED, that the proper officers of the Corporation are authorized to sell and issue common shares in an aggregate amount of money and other property (as a contribution to capital and as paid in surplus), which together with the aggregate amount of common shares outstanding at the time of issuance, does not exceed $1,000,000, and RESOLVED, that the sale and issuance of shares shall be conducted in compliance with IRC Sec. 1244, so that the Corporation and its shareholders may obtain the benefits of IRC Sec. 1244, and it is further RESOLVED, that the proper officers of the Corporation are directed to maintain such accounting records as are necessary so that any shareholder that experiences a loss on the transfer of common shares of the Corporation may determine whether they qualify for “ordinary loss” deduction treatment on their personal income tax returns.
There being no further business to come before the meeting, upon motion duly made, seconded and unanimously voted, the meeting was adjourned.
Date:
_________________________________
Secretary
________________________________
Attest: Chairman of the board
MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS TO ADOPT STOCK OWNERSHIP PLAN UNDER SECTION 1244 OF THE INTERNAL REVENUE CODE
Review List
This review list is provided to inform you about this document in question and assist you in its preparation. This document allows the investors to write their stock off as an ordinary expense, and not under capital gains, should the deal go down and become worthless. It has no downside. Do it.
- Make multiple copies. Keep them in the corporate records and make them available, as needed, to the shareholders.
Frequently Asked Questions
What is Section 1244 stock?
Section 1244 stock refers to shares issued by a corporation that qualifies as a "Small Business Corporation" under Internal Revenue Code Section 1244. This designation allows shareholders to treat losses on the sale or exchange of their shares as an ordinary loss on their personal income tax returns. The corporation must be organized and managed to meet the definition of a Small Business Corporation as outlined in IRC Sec. 1244.
How does a corporation adopt a Section 1244 stock plan?
A corporation adopts a Section 1244 stock plan through a resolution passed by its Board of Directors. The board must determine that the corporation shall be organized and managed as a Small Business Corporation under IRC Sec. 1244. The resolution authorizes proper officers to sell and issue common shares in accordance with the plan.
What are the tax benefits of Section 1244 stock?
The primary tax benefit of Section 1244 stock is that shareholders can treat losses from the sale or exchange of their shares as an ordinary loss on their personal income tax returns. This is advantageous because ordinary losses can offset ordinary income, potentially reducing the shareholder's overall tax liability. This treatment is available only if the corporation complies with IRC Sec. 1244 requirements.
What is a Small Business Corporation under IRC Sec. 1244?
A Small Business Corporation under IRC Sec. 1244 is defined in the Internal Revenue Code and refers to a corporation that meets specific criteria to qualify for Section 1244 stock treatment. The corporation must be organized and managed to satisfy this definition, as determined by its Board of Directors. The exact requirements are set forth in IRC Sec. 1244(1) as amended.
What is the role of the Board of Directors in approving Section 1244 stock?
The Board of Directors plays a crucial role by adopting a resolution that determines the corporation shall be organized and managed as a Small Business Corporation under IRC Sec. 1244. The board's motion and resolution authorize the proper officers to sell and issue common shares in accordance with the plan. This formal approval is necessary to ensure the shares qualify as Section 1244 stock.
What does the Board resolution for Section 1244 stock authorize?
The Board resolution authorizes the proper officers of the Corporation to sell and issue common shares in an aggregate amount of money and other property as a contribution to capital and as paid in surplus. This authorization is subject to the aggregate amount of common shares outstanding at the time of issuance. The resolution ensures compliance with IRC Sec. 1244 requirements.
How are losses on Section 1244 stock treated for tax purposes?
Losses on the sale or exchange of Section 1244 stock are treated as ordinary losses on the shareholder's personal income tax returns. This means they can be used to offset ordinary income, rather than being treated as capital losses, which have more restrictive offset rules. This treatment is enabled by the corporation's compliance with IRC Sec. 1244.
What is required for a corporation to issue Section 1244 stock?
To issue Section 1244 stock, the corporation must be organized and managed as a Small Business Corporation under IRC Sec. 1244, as determined by its Board of Directors. The board must adopt a resolution authorizing the sale and issuance of common shares in compliance with the code. The shares must also meet the definition of Section 1244 stock under IRC Sec. 1244(c)(1).
What is the definition of Section 1244 stock under IRC Sec. 1244(c)(1)?
Section 1244 stock is defined in IRC Sec. 1244(c)(1) as amended, and refers to shares issued by a corporation that qualifies as a Small Business Corporation. The corporation's Board of Directors must determine that the shares meet this definition. This definition is critical for shareholders to claim ordinary loss treatment.
Why should a corporation adopt a Section 1244 stock ownership plan?
Adopting a Section 1244 stock ownership plan enables shareholders to treat losses on the sale or exchange of their shares as ordinary losses on their personal income tax returns. This can provide significant tax benefits by allowing losses to offset ordinary income. The plan requires the corporation to be organized and managed as a Small Business Corporation under IRC Sec. 1244.
