How do I capture the small business Section 1244 C Corporation Dissolution stock loss against my income?

[patrickgartner]

I tried entering my stock sale manually for a loss, as described on the help window. The program did not prompt me for the small business C corporation section 1244 stock loss. It placed the stock loss on my K-1. This is unacceptable.

[TomYoung]

Since TurboTax Self Employed doesn't create a (Schedule?) K-1, it only accepts input from a Schedule K-1, I can't see how it could have placed anything on a Schedule K-1.

[patrickgartner]

Well, as I stated previously it didn't work in Premier either. I upgraded for the additional $10 to Home & Business. Frankly, if you knew what you were talking about, you would know stock losses can be put into either version. Do you know anything about dissolving a qualified small business C Corporation?

[patrickgartner]

That would be 26 U.S. Code 1244...

[patrickgartner]

I see... crickets from the peanut gallery and Intuit is worthless.

[TomYoung]

I'm simply another user, like you.  

Generally I think a do know what I'm talking about and have answered many questions in here about the sale of qualified small business stock.  Since you seemed to be asking your question from TurboTax Self Employed I was puzzled by your reference to "it (presumably TT Self Employed) placed the stock loss on my (Schedule?) K-1."

But a response by you of "Frankly, if you knew what you were talking about, you would know stock losses can be put into either version" is the sort of response that makes one disinclined to engage further.

[patrickgartner]

Really. FYI Tom: Telling me that I don't know what I am talking about, when I do, makes me less inclined to use this product, since this is the best help I can ask for from Intuit. I don't need help from someone that doesn't have a stock trading account, much less someone that doesn't understand 26 US Code Section 1244. This is a complicated issue and not for an average user.

[Rick19744]

Then you are on your own.  We will close this question.

[TomYoung]

@patrickgartner

1.  I certainly did not tell you that you did not know what you were talking about.  I was quoting YOUR REPLY TO ME.
2.  While this post is closed, I'll ask a moderator over in the SuperUser's lounge if they would like to respond.  They can always reopen it.

[DDollar · Accepted solution]

In order to enter a Section 1244 Stock Sale (or exchange)  you need to go to the Investment Income section.  This is found under the Federal tab and Income & Expenses.  Select “start” or “revisit” by “Stocks, Mutual Funds, Bonds, Other”.  From here your screens may be different if you have already entered information into this section. 

If you have not entered information in this section the first question should be “Did you sell any investments in 2017?”.  Select “Yes”.  You will then be asked if you got a 1099-B.  Since this is the dissolution of your C Corporation I would say “No” here.  If it was reported on a 1099-B then select Yes.

At this point the questions should look similar whether this is your first time through this section or not.

When asked to choose the type of investment select “Stocks”.

Enter the information requested about the sale of the stock.  The date sold would be the date of dissolution of the C Corp.

When asked “Did you buy this stock?” select “I bought this stock”.  While this is not a traditional type of purchase you did invest money to gain the stock.  You can also select “One” for the number of times you purchased and enter your total basis in the stock as the purchase price.  If you select another acquisition method you will not receive the following question.

After you enter the purchase information you should see a screen that says “Do any special situations apply to this sale?”.  Select “Small business stock”.  See screen shot below.

The next question will ask what kind of stock.  Select “Section 1244 stock”.  See Screenshot below

Finally you will get to a screen that says “Tell us about the stock sold”.  (See screenshot below)  You have to check everything on this page (except “None of the above”) to qualify for Section 1244 treatment.  If any of these statements do not apply you should not check the box.

[patrickgartner]

I found a bug digging though the forum: Your instructions are spot-on, except that they omit the requirement that one places the purchase of the stock as a "Single Lot" instead of "Two or More Lots." To get around this issue, the user must input multiple sales of a single lot and will then trigger the QSBC 1244 Stock prompt for special situations. Thanks again!

[VILLARIP99]

I went through the steps and was able to enter the information.  I had a loss on the 1244 stock but it appears that all of the loss was put into the capital loss bucket and none of it into ordinary income.   I understand that a certain amount counts as ordinary income loss and the remainder as a capital loss. Is there another method to input the information to ensure proper classification?  Thanks

[DaveF1006]

Turbo Tax will treat these losses as a capital losses unless you choose to report these losses to be ordinary losses.  i found this link that may be helpful to you. To report these losses as ordinary losses, you would need to report these on form 4797. i would suggest purchasing the Turbo Tax software and enter these directly on the form itself. i am not sure if Turbo Tax Online will give you the option to make this election.

[reg-20-flamespla]

It looks like you report this as an Other asset in 2020

• Stock Sales ->
• Other ->
• Stock/ bought with cash ->
• This was a Small Business Stock and Worthless

however it seems to insist on "helping" you with cost basis, and required you to enter your number of shares, however you can't enter a number >= 100,000, which I need to do.

I'm wondering if I can just split it into two to get under the bizarre limit.

[eriksteeb]

I'm having the same issue of trying to claim a Section 1244 (worthless startup) loss, as an ordinary loss, not a capital loss. I've tried going directly into creating a Form 4797 in the Mac software version. I can see several 4797 choices (4797p1, p2, etc)  in the forms list but the only one I can actually edit is the version that is titled "Enterable 4797". The problem is that one is only page2 of 4797. How do I create an editable 4797 page 1?