ExpertEasy1 markMultiple Choice
CPA · Question 38 · Area I: Individual Compliance and Planning
An individual taxpayer sells §1202 Qualified Small Business Stock (QSBS) acquired in Year 1 (after 2010) and held for 6 years. The gain is $2,000,000. The taxpayer's basis was $500,000. What percentage of the gain is excluded from federal income tax?
An individual taxpayer sells §1202 Qualified Small Business Stock (QSBS) acquired in Year 1 (after 2010) and held for 6 years. The gain is $2,000,000. The taxpayer's basis was $500,000. What percentage of the gain is excluded from federal income tax?
Answer options:
A.
50%
B.
75%
C.
0%
D.
100%
How to approach this question
Check acquisition date. After Sept 27, 2010 = 100% exclusion (up to greater of $10M or 10x basis).
Full Answer
D.100%✓ Correct
D
IRC §1202. Stock acquired after Sept 27, 2010, and held for more than 5 years is eligible for a 100% exclusion of the gain for regular tax and AMT purposes.
Common mistakes
Applying the old 50% rule.
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