Courtney, who is much older than she appears, founded Talbot, Inc., in 2001 and has spent the last 22 years building the company into a major retailer of off-road vehicles. Courtney owns 70% of the stock of Talbot, Inc., with a $700,000 total stock basis. Her three children Thomas, Yulisa and Abel each own 10%. Over the years, Courtney has built up a strong company with impressive borrowing capacity. But, Talbot, Inc. has never owned any real estate. Now Courtney wants to retire by selling, in one single transaction, her entire 70% interest in Talbot, Inc. back to the company for $32,000,000. Following the sale, Courtneys stock will be cancelled, leaving Thomas, Yulisa, and Abel as equal one-third owners of Talbot, Inc. Courtneys goal is to pay as little federal income tax on the sales proceeds as the law allows. She plans to use IRC 1231, 1244 and 1202 to avoid as much tax as possible, and then turn to a Qualified Opportunity Zone Fund to avoid additional federal income taxes. Assume Talbot, Inc., stock and Courtneys ownership of the stock meets the requirements of 1244, 1202 and Quaified Opportunity Zone investment. (5 Points). What is the maximum amount of gain that can be excluded from federal income taxes under IRC 1231? (5 Points). What is the maximum amount of gain that can be excluded from federal income taxes under IRC 1244? (10 Points). What is the maximum amount of gain that can be excluded from federal income taxes under IRC 1202? (5 Points). Out of the remaining gain, if any, that has not been excluded under 1231, 1244, and 1202, what is the maximum amount of gain that can be excluded from federal income tax by investment in one single Qualified Opportunity Zone Fund?.

1. Courtney, who is much older than she appears, founded Talbot, Inc., in 2001 and has spent the
last 22 years building the company into a major retailer of off-road vehicles. Courtney owns
70% of the stock of Talbot, Inc., with a $700,000 total stock basis. Her three children Thomas,
Yulisa and Abel each own 10%. Over the years, Courtney has built up a strong company with
impressive borrowing capacity. But, Talbot, Inc. has never owned any real estate. Now
Courtney wants to retire by selling, in one single transaction, her entire 70% interest in Talbot,
Inc. back to the company for $32,000,000. Following the sale, Courtneys stock will be
cancelled, leaving Thomas, Yulisa, and Abel as equal one-third owners of Talbot, Inc.
Courtneys goal is to pay as little federal income tax on the sales proceeds as the law allows. She
plans to use IRC 1231, 1244 and 1202 to avoid as much tax as possible, and then turn to a
Qualified Opportunity Zone Fund to avoid additional federal income taxes. Assume Talbot, Inc.,
stock and Courtneys ownership of the stock meets the requirements of 1244, 1202 and Quaified
Opportunity Zone investment.
(5 Points). What is the maximum amount of gain that can be excluded from federal income taxes
under IRC 1231?
(5 Points). What is the maximum amount of gain that can be excluded from federal income taxes
under IRC 1244?
(10 Points). What is the maximum amount of gain that can be excluded from federal income
taxes under IRC 1202?
(5 Points). Out of the remaining gain, if any, that has not been excluded under 1231, 1244, and
1202, what is the maximum amount of gain that can be excluded from federal income tax by

2. investment in one single Qualified Opportunity Zone Fund?