Section 1202 Gain – Small Business Stocks

Your mutual fund company might send you a Form 1099-DIV. This could show an amount in Box 2c (Section 1202 gain). If so, the mutual fund you sold qualified as small-business stock. If this applies, you might be able to exclude up to 100% of the capital gain from your income. You can do this if you held the stock for more than five years. You’re taxed on the remaining capital gain at whichever rate is lower:

  • 28%
  • Your marginal tax rate

The amount of gain you can exclude is figured by the date you got the stock:

  • 50% — Jan. 1, 2015 and later
  • 100% — Sept. 28, 2010, through Dec. 31, 2014
  • 75% — Feb. 18, 2009, through Sept. 27, 2010
  • 50% — Aug. 11, 1993, through Feb. 17, 2009

Your mutual fund company will send you a statement with the information you need to report this gain.

To learn more, see Form 8949 and Schedule D instructions at www.irs.gov.

Related Topics

Related Resources

Average Cost Basis – Mutual Funds

Learn more about the average cost basis method of selling shares and get tax answers at H&R Block.

I have a question about stock sales taxes. How do I report sales of stocks from a 1099-B tax form?

Need to know how to report the sales of stock on your taxes? Learn more from the tax experts at H&R Block.

Capital Gain Distributions

What is a capital gain distribution? Learn more about form 1099-Div Box 2A and get tax answers at H&R Block.

Taxable and Tax Exempt Interest Income

Learn more about interest income and whether is qualifies as taxable or tax exempt interest income from the tax experts at H&R Block.