39. Taylor bought 10,000 shares of qualifying Section 1202 stock from a startup company A on May 1, 2007 for $1,000,000 and 5,000 shares of start-up company B on June 1, 2010 for $200,000. In February 2011, she sold 1,000 shares of A for $500,000; in December she also sold 2,000 shares of B for $300,000 but immediately invested $150,000 in qualifying Section 1202 stock of a third start-up company.

a. What are the tax effects on Taylor’s income for these sales in 2011?

b. How would your answers change if Taylor had purchased the stock of start-up company A in 2004?