Question

A married individual invested in section 1244 small business stock in year 1. in year 7, the individual sold the stock at a loss of $157,000. there were no other stock transactions during year 7. if the taxpayer files a joint return, how much loss can the taxpayer deduct in year 7 against ordinary income?

a. $157,000

b. $53,000

c. $3,000

d. $103,000

Answer 1

If the taxpayer files a joint return, how much loss can the taxpayer deduct in year 7 against ordinary income? D. 103,000

Under Section 1244: 
(b)Maximum amount for any taxable year
For any taxable year the aggregate amount treated by the taxpayer by reason of this section as an ordinary loss shall not exceed—(1) $50,000, or(2) $100,000, in the case of a husband and wife filing a joint return for such year under section 6013

100,000 of the 157,000 is the ordinary loss. 
57,000 is the long-term capital loss BUT capital loss is only limited upto 3,000.

So, 100,000 ordinary loss + 3,000 capital loss = 103,000 total loss