In September of 2016,Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000.She had held the stock for 17 months.Forty-five days after the sale she purchased other qualified small business stock for $1,100,000.How much of the gain will she recognize?

Question

Quizplus · Accepted Answer

Michelle meets the requirements for the Section 1202 exclusion, which allows for a exclusion of 100% of the gain from the sale of qualified small business stock if certain conditions are met. Since she held the stock for more than 6 months, and the sale occurred more than 5 years from the date of issuance, the entire gain qualifies for the exclusion. Therefore, she will not recognize any gain and the answer is A.

In September of 2016,Michelle Sold Shares of Qualified Small Business