A taxpayer holds Qualified Small Business Stock (QSBS) acquired on January 1, 2012, for $500,000. In Year 1 (current year), the taxpayer sells the stock for $6,000,000. The stock meets all requirements of Section 1202. What is the amount of gain subject to federal income tax in Year 1?

The stock was acquired in 2012 (after Sept 27, 2010), so it qualifies for the 100% exclusion. The gain is $5,500,000. The limitation is the greater of $10 million or 10x basis ($5 million). The limit is $10 million. Since the gain ($5.5M) is less than the limit ($10M), the entire gain is excluded. Taxable gain is $0.<br/><br/>Correction on Option B selection in JSON: I initially marked B, but analysis shows A is correct ($0). I will set A as correct in the final JSON.