Question

Cory recently sold his qualified small business stock for $90,000 after holding it for 10 years. His basis in the stock is $40,000. Applying the rules as if the stock were acquired in 2020 and assuming his marginal tax rate is 32 percent, how much tax will he owe on the sale?

Answer 1

Solution:

As per Sec 1202 of Internal Revenue Code allows investors to take exemption of 100% of capital gains on qualified small business stock (QSBS) held for more than 5 years is excluded.

THIS Exemption on capital gains has the limit of $10 million or 10 times the adjusted basis of stock which ever is greater the capital gains above the limit are taxable

sale proceeds of capital stock	$90,000
basis for the stock	$40,000
capital gains for the stock	$50,000

as the capital gain below the limit of $10 million ,above capital gain Qualifies for the exemption u/s 1202

so the taxable payable on sale will be $0

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