bPporate taxpayers 1202 was added to the Code. The porate taxpayer an exclusion of 100 percent o ualified small business stock" acquired after September 27 r more than 5 years. 42 That is right; there is no tax on and 75) percent exclusions for small egain. There are lower (50 and 75) per e gain. 12 rate, eercent exclusion) percent rate. However, there are ceiling ain is ta effectively taxing such gain at a zero, 7 (75 percent exclus stock acquired in prior years43 and, to the extent that included in gross income, such gain is taxed at Section a 28 percent ion), or 14 itations on the amount of a shareholder's Section 1202 gain.4 In n, the definition of qualified small business stock is technical. PROBLEMS T. a single taxpayer, has a salary of $200,000 in the current year. T also the following transactions all involving the sale of capital assets: () a $15,000 on a "collectible" held for 2 years; and (2) a gain of $20,000 gain o on stock held for 15 months. (a) Determine the amount of T's net capital gain. (b) At what rate will the components of T's net capital gain be taxed? 39 I.R.C. S 1(h)(1). from stock a be taxed at 28% under 1 (h)(1)(F) 40 Statutorily if Single had ordinary income taxed at a flat 30% rate and a $10,000 LTCL d $7,500 of 28% gain and$7,500 of 25% gain, single would have $5,000 of net capital gain which would be taxed at the 25% rate under l R C 1(h)(1)(B) leaving no gain to 41 Thus, if Single had ordinary income taxed at a flat 30% rate, a $15,000 NSTCL and $5.000 NCG IRC,S th)(1)(C) or (D) would apply to tax the $5,000 net capital gain at a 15% ee 696 THE CHARACTERIZATION OF INCOME AND DEDUCTIONS ssuming thereny deductmption). what is T's tax liability n disregarding any deductions (includingncome deduction and personal exemption), what is T the current year? income and standard CHAPTER 2 can be deducted from ordins either long-term or short each succeeding year u Part B of this Chapte l loss balance rema 2. S, a single taxpayer, is a high-income taxpayer in the current year. S also has the following transacti of capital assets: (1) a gain of $120,000 on stock h ard into succeeding t inst capital gains (an The statutory me with a salary of $50% loss of $20,000 on stock held for 3 years. Assume there is nhsand e deduction), what is S's tax liability under $ 1 in the current g the stan. at ordinary income and disregarding any deductions (incl 3. Taxpayer, who is in the highest federal tax bracket has a $5,000 gain from a collectible and a $5,000 long-term transactions and sho gain from stock, both hel nst net shorts. S previously discus situations. First, t eliminates, dollar there may be a ne dollar, any net sh short-term and familiar, preser utilized in any Implicit in all dichotomy be limitless cap of ordinary reason for (a) What is Taxpayer's net capital gain and how is it taved Taxpayer also has a $5,000 loss from a collectible held (b) What results in (a), above, if instead Taxpayer's $5,000 los is (c) What results in (a), above, if instead Taxpayer's $5,000lossis (d) What is Taxpayer's net capital gain and how is it taxed if long term? from stock held long-term? from stock held for 9 months rather than from the collectible Taxpayer has a $5,000 gain from a collectible, a $5,000 unrecaptured S 1250 gain, a $5,000 gain from stock, and a $10,000 loss from stock, all held long-term? against or utilization discussio The of capita C. THE MECHANICS OF CAPITAL LOSSES 10g.)(1) (0)(A)(), 1922