Board Resolution for Election of IRC Section 1244


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									A Board of Directors Resolution is used to facilitate and document decisions that must
be made during the course of the year. The Board of Directors generally execute
director resolutions during the annual board of directors meeting. This particular
resolution can be used when drafting the meeting minutes for a corporation after the
board has adopted a resolution electing to qualify its common stock for treatment under
Internal Revenue Code Section 1244. This document contains standard language used
for this type of resolution and may be customized to provide any specific language that
may be necessary. This resolution should be used when a small business wants to
adopt a resolution to adopt Section 1244.
        The board reviewed Internal Revenue Code §1244 and considered its applicability
to the corporation's common stock. The [Title of Officer] instructed that Section 1244
entitles shareholders of a small business corporation with stock that qualifies as Section
1244 stock to ordinary loss tax treatment for losses from such stock, and further
presented the definition of a “small business corporation” to the board as such term is
defined in Internal Revenue Code §1244(c)(3)(A). It was determined that the corporation
qualifies as a small business corporation under said section. Thereafter, the board adopted
the following resolution:

        RESOLVED, that this corporation intends to qualify its common stock for
treatment under Internal Revenue Code §1244, under which the corporation plans that its
total equity capital and paid-in surplus will not in any event exceed $1,000,000, that it
will be largely an operating company, with less than 50 percent of its gross receipts
coming from passive sources (royalties, rents, dividends, interest, annuities, and sales or
exchanges of stocks or securities), and that it will conform in all other respects to the
requirements necessary to qualify its common stock for treatment under Internal Revenue
Code §1244.

       (The foregoing is an optional resolution, and some corporations will not
qualify. A tax professional should be consulted prior to making the above resolution.)


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