Final answer:
The correct statement about the sale of qualified small business stock (Sec. 1202 stock) is D) Up to 100% of the gain could be excluded depending on the acquisition date. To qualify for the capital gains exclusion, the stock must be held for more than five years, not one year. The gain is taxed as a capital gain, not ordinary income, and the effective tax rate isn't necessarily 28%.
Step-by-step explanation:
When it comes to the sale of qualified small business stock (often referenced as Sec. 1202 stock), it's important to understand the tax implications associated with capital gains from such investments. Statement D) Up to 100% of the gain could be excluded depending on the acquisition date is CORRECT. The Internal Revenue Code Section 1202 allows for an exclusion of 50%, 75%, or even 100% of the capital gains from the sale of qualified small business stock, if certain conditions are met, including holding the stock for more than five years.
However, it is important to note that the other provided statements are not correct. For instance, the effective capital gains tax rate on such stock isn't a flat 28% (A is incorrect), the gain is not taxed as ordinary income but rather as a capital gain (B is incorrect), and the stock actually must have a long-term holding period of at least five years, not one year (C is incorrect), to qualify for the Section 1202 exclusion.