Alfred O. And Margaret A. Bates v. The United States of America

LIVELY, Circuit Judge.

This case concerns the requirements which must be met for a taxpayer to be entitled to the favorable tax treatment extended by Section 1244 of the Internal Revenue Code of 1954, 26 U.S.C. § 1244 (1970). 1

Ordinarily when an investment in a corporation becomes worthless, the investor’s loss is treated as a capital loss, the deducti-bility of which is limited by § 1211 of the Code. When a loss is suffered on stock which qualifies under § 1244, however, the investor may treat it as an ordinary loss, which is deductible from other taxable income. This is a significant…