DATE: November 19, 2019

Rebecca invested in a green energy start-up company called Green Solutions, Inc., a C Corporation. Rebecca purchased 500 shares of Green Solutions for $105,000 in 2015. Unfortunately, Green Solutions has been generating losses since its formation and the business is not going well. Further, Rebecca has not been able to sell any of the shares, even for prices that are well below her purchase price. Therefore, Rebecca has been completely unable to sell or exchange the shares. Furthermore, she has completely abandoned the shares and has disclaimed all ownership rights in Green Solutions.

Our property taxation team has determined that the 500 shares are considered worthless under the Internal Revenue Code and they became worthless during the 2019 tax year. In addition, the shares that Rebecca purchased are considered capital assets to Rebecca for tax purposes and Green Solutions qualifies as a Small Business Corporation and its stock is considered 1244 Small Business Stock.

Research the possible tax consequences for Rebecca. In particular, can Rebecca claim a loss for the shares if she is unable to sell or exchange them? In addition, if Rebecca is allow to claim a loss for the shares this year, are there any loss limitations that apply? How much of the loss will Rebecca be able to deduct this year?

Tax computations of the US