A is corrent. The requirement is to determine Danielson’s taxable gain after exclusion on the sale of qualified small business stock held for six years. A noncorporate taxpayer can generally exclude 50% (100% for 2012 and 2013) of the capital gain resulting from the sale of qualified small business stock held more than five years. The amount of excludible gain is subject to a cumulative limit of the greater of $10 million, or 10 times the investor’s stock basis. Here, the sale for $16,000,000 of qualified stock that was acquired for $2,000,000 results in a gain of $14,000,000. Since the $14,000,000 gain does not exceed 10 times Danielson’s stock basis, 100% of the gain can be excluded, resulting in a taxable gain after exclusion of zero.
B is incorrect. One hundred percent of Danielson’s $14 million gain can be excluded.
C is incorrect. One hundred percent of Danielson’s $14 million gain can be excluded.
D is incorrect. One hundred percent of Danielson’s $14 million gain can be excluded.
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