Tax MCQ Income Tax Chapter 8 In 2006, Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified small business corporation for all of its common stock. She sells one-half of the stock after five years for $4,000,000. What is the amount of taxable gain on the transaction?

In 2006, Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified small business corporation for all of its common stock. She sells one-half of the stock after five years for $4,000,000. What is the amount of taxable gain on the transaction?

Income Tax Chapter 8

In 2006, Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified small business corporation for all of its common stock. She sells one-half of the stock after five years for $4,000,000. What is the amount of taxable gain on the transaction?

Answer: The amount of the realized gain is $4,000,000 - $250,000 = $3,750,000. Fifty percent of the gain ($1,750,000 ) is eligible for the exclusion for qualified small business stock. $1,750,000 is taxable.

Tax MCQ

In 2006, Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified small business corporation for all of its common stock. She sells one-half of the stock after five years for $4,000,000. What is the amount of taxable gain on the transaction?

In 2006, Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified small business corporation for all of its common stock. She sells one-half of the stock after five years for $4,000,000. What is the amount of taxable gain on the transaction?

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