Raymond, a single taxpayer, has taxable income of $210,000 from all sources except capital gains. He has a $10,000 gain from the sale of qualified small business stock he acquired in 1995. What is the total tax saving Raymond receives because of any special treatment of his $10,000 long-term capital gain on small business stock?

Question

Quizplus · Accepted Answer

The gain from the sale of qualified small business stock (QSBS) acquired in 1995 and held for more than five years is eligible for a 50% exclusion under IRC Section 1202. Therefore, Raymond can exclude $5,000 (50% of $10,000) of his gain. Assuming he is in the 28% tax bracket for his taxable income level, the tax saving on the excluded portion would be $5,000 x 28% = $1,400.

Raymond, a Single Taxpayer, Has Taxable Income of $210,000 from All