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?

Question

Quizplus · Accepted Answer

Cory's sale of qualified small business stock (QSBS) that he held for more than 5 years is eligible for a 100% exclusion of the gain under Section 1202 of the Internal Revenue Code, assuming the stock was acquired after September 27, 2010, and before January 1, 2022. Since the stock was acquired in 2020 and held for 10 years, the entire gain of $50,000 ($90,000 sale price - $40,000 basis) can be excluded from income. Therefore, Cory would owe $0 in tax on the sale, making all the provided choices incorrect.

Cory Recently Sold His Qualified Small Business Stock for $90,000