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:

50%

75%

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

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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