Here's the section of the instructions for form
4797 (used to report the loss) that applies to 1244:
"Section 1244 (Small Business) Stock
Individuals report ordinary losses from the sale or exchange (including worthlessness) of section 1244 (small business) stock on line 10.
To qualify as section 1244 stock, all six of the following requirements must be met.
You acquired the stock after June 30, 1958, upon original issuance of the shares from a domestic corporation (or the stock was acquired by a partnership
in which you were a partner continuously from the date the stock was issued until the time of the loss).
If the stock was issued before November 7, 1978, it was issued under a written plan that met the requirements of Regulations
section 1.1244(c)-1(f), and when that plan was adopted, the corporation was treated as a small business corporation under Regulations section 1.1244(c)-2(c).
If the stock was issued after November 6, 1978, the corporation was treated as a small business corporation at the time the stock was issued under Regulations section 1.1244(c)-2(b). To be treated as a small business corporation, the total amount of money and other property
received by the corporation for its stock as a contribution to capital and paid-in surplus generally may not exceed $1 million.
The stock was issued for money or other property (excluding stock or securities).
The corporation, for its 5 most recent tax years
ending before the date of the loss, derived more than 50% of its gross receipts
from sources other than royalties, rents, dividends
, annuities, and gains from sales
and exchanges of stocks or securities. If the corporation was in existence for at least 1 tax year but fewer than 5 tax years ending before the date of the loss, the 50% test applies for the tax years ending before that date. If the corporation was not in existence for at least 1 tax year ending before the date of the loss, the 50% test applies for the entire period ending before that date. The 50% test does not apply if the corporation's deductions
(other than the net operating loss and dividends-received deductions) exceeded its gross income
during the applicable period. But this exception to the 50% test applies only if the corporation was largely an operating company within the 5 most recent tax years ending before the date of the loss (or, if less, the entire period the corporation was in existence).
If the stock was issued before July 19, 1984, it must have been common stock.
The maximum amount that may be treated as an ordinary loss on Form 4797 is $50,000 ($100,000 if married filing jointly
). Special rules
may limit the amount of your ordinary loss if (a) you received section 1244 stock in exchange for property with a basis in excess of its FMV or (b) your stock basis increased because of contributions to capital or otherwise. See Pub. 550 for more details.
Attach a computation of the loss from the sale or exchange of section 1244 property. On line 10, enter “Losses on Section 1244 (Small Business Stock),” in column (a), and enter the allowable loss in column (g). Report on Schedule D
losses in excess of the maximum amount that may be treated as an ordinary loss (and all gains) from the sale or exchange of section 1244 stock. Individuals, see the instructions for Form 8949.
Keep adequate records to distinguish section 1244 stock from any other stock owned in the same corporation."
And here's a link to the full instruction set for form 4797:
And finally, here's form 4797: