Karl and Wendy, MFJ, purchased $100,000 of Karl's stock from ABC Co. as an initial investor in this small business start-up 3 years ago. At the time, ABC's capitalization was $800,000. They have recently sold it at a gain of $50,000. What is the tax treatment of this gain?
The first $100,000 of long-term gain is not taxable due to the Section 1244 status of the stock
Section 1244 allows the taxpayer to take a tax deduction for purchases of Section 1244 stock
The first $50,000 of long-term gain is not taxable due to the Section 1244 status of the stock
The gain will be treated as long-term capital gain