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loss pursuant to section 1244 cannot exceed $50,000. Sec.
1244(b). The term “section 1244 stock” is defined to mean stock
of a domestic corporation where: (1) At the time of the stock's
issuance, the corporation had not received money or other
property in excess of $1 million for its stock, as a contribution
to capital, or as paid-in surplus; (2) the stock was issued for
money or other property (other than stock or securities); and (3)
the corporation during its most recent 5 taxable years (or, if
less, the period during which the corporation has been in
existence) derived more than 50 percent of its aggregate gross
income from sources other than royalties, rents, dividends,
interest, annuities, and sales or exchanges of stocks or
securities. The third test, however, does not apply where the
amount of deductions allowed exceeds the amount of the
corporation’s gross income. Sec. 1244(c). The Commissioner is
empowered to prescribe the regulations necessary to carry out the
purposes of section 1244. Sec. 1244(e). Pursuant to that
authority, the Commissioner has issued regulations requiring a
taxpayer to have records sufficient to establish that the
taxpayer is entitled to the loss and satisfies the requirements
of section 1244.5 Sec. 1.1244(e)-1(b), Income Tax Regs. We have
5
The Commissioner’s regulations previously required taxpayers
claiming a loss pursuant to sec. 1244 to attach an information
report to the return in which the loss was claimed showing the
address of the corporation issuing the stock, the manner in which
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