Corp 1202 exclusion

[Mike Polacek]

I have a small C Corp this is dissolving with 2 partners.  The partners have had their stock since 1998.  Based on my research the stipulations are being met for the 50% exclusion which would result in the remaining gain being taxed at 28%.  The Sched D worksheet even shows it qualifying for 28%.   When I go to the tax computation worksheet it doesn't show any gain being taxed at 28% but all income being subject to normal income tax rates.  What am I missing?

[sjrcpa]

Are they otherwise below the 28% bracket?

[Mike Polacek]

They are well below the 28% tax bracket.  My reading of the way the gain is taxed was it is taxed at 28%.  I look at the schedule D tax summary page and see the gains included at the normal income rates but the gain is small enough it never gets out of the 24% bracket.

For comparison I upped the gain by $500k and saw the change that it went through the brackets until the highest portion was taxed at only 28%.  That led to my assumption that they are taxed at ordinary rates up to a max of 28% but that wasn't the way I was reading the code.