Heidi Invested in a Mid-Sized Local Company with Gross Assets

question 84

Multiple Choice

Heidi invested in a mid-sized local company with gross assets of $17,000,000.Heidi purchased 2,000 shares for $44,000 in 2000.In 2017,Heidi sold the stock for $84,000.How is the gain treated for tax purposes?

• A)$40,000 capital gain and taxed at preferential rates.
• B)$20,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular rates.
• C)$20,000 excluded from gross income under Section 1202 and $20,000 taxed at 28%.
• D)$20,000 excluded from gross income under Section 1202 and $20,000 taxed at preferential capital gains rates.

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Definitions:

Seller Receives

The final amount a seller gets after transaction costs, taxes, or any deductions when a good or service is sold.

Taxes Levied

Charges imposed by governments on individuals or entities to fund government spending on public services and infrastructure.

Tax Burden

The total amount of tax levied on an individual or entity, indicating the actual economic impact of taxation on wealth.

Tax Imposed

A financial charge or levy placed by a government on an individual or an entity to fund public expenditures.