Tammy, who is single, purchased 1,000 shares of qualified small business stock in Startup, Inc., in 2014. She had paid $40,000 for the stock by way of making a capital contribution to Startup, which issued the stock directly to her in exchange. There have been no subsequent adjustments to her original cost basis in the stock and she hasnt purchased any additional shares.

1. What amount and character of gain or loss, if any, would Tammy recognize if she sold all 1,000 shares today for $75,000? Why?

2. What amount and character of gain or loss, if any, would Tammy recognize if she sold all 1,000 shares today for $25,000? Why?