Pamela purchased 500 shares of Qualified Small Business Stock (QSB) for $900,000 on October 2, 2012. On November 29, 2018, she sells the stock for $1,000,000. Pamela also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000. Pamela has $100,000 of other income. Which of the following statements about the stock sale is/are true?
I.Pamela will pay no tax on the two stock sales.
II.Pamela can only deduct $3,000 of the $10,000 loss on the sale of the stock.

Question

Pamela purchased 500 shares of Qualified Small Business Stock (QSB) for $900,000 on October 2, 2012. On November 29, 2018, she sells the stock for $1,000,000. Pamela also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000. Pamela has $100,000 of other income. Which of the following statements about the stock sale is/are true?
I.Pamela will pay no tax on the two stock sales.
II.Pamela can only deduct $3,000 of the $10,000 loss on the sale of the stock.
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Quizplus · Accepted Answer

Pamela will pay no tax on the sale of the QSB stock because it qualifies for the 100% exclusion. The loss on the sale of the other stock is limited to $3,000 because of the annual capital loss deduction limit.

Pamela Purchased 500 Shares of Qualified Small Business Stock (QSB)