Question

Sally purchased 500 shares of qualified small business stock for $100,000 when it was originally issued on October 13, 2006. If Sally sold the shares for $150,000 on September 11, 2019, how much gain must she recognize?

• A.$25,000
• B.$40,000
• C.$50,000
• D.$0

Sam’s building that was used for business was partially destroyed by a hurricane. There was no insurance for hurricane damage. The building had an adjusted basis of $46,000. The FMV was $90,000 just before the hurricane and $65,000 just after the hurricane. What is the deductible casualty loss?

• A.$25,000
• B.$44,000
• C.$46,000
• D.$19,000

Answer 1

1) Any gain on qualified small business stock allows investor to exclude 100% of it till the gain is maximum of $ 10 million.

In this case the gain of $50,000 will be totally excluded and hence Sally is not required to recognise any gain

Hence the correct answer is D i.e 0

2) As per the law if a building is partially destroyed by any casualty like hurricane then the amount o deductible casualty loss will be lesser of

i) Adjusted basis of the property

ii) Decrease in the FMV of the property due to the casualty

In the above case Adjusted basis is $46,000 and Decrease in FMV is $90,000- $65,000 = 25,000

Hence the answer is 25,000

So the correct answer is A