If the Form 1099-DIV that you receive from your mutual fund company shows an amount in box 2c (Section 1202 gain), the mutual fund you own sold qualified small business stock. In this case, 50% of the capital gain from the sale can be excluded from your income. The remaining capital gain is taxed at 28%, or at your marginal tax rate if it’s lower.
Report the gain in the Dividends and Distributions (1099-DIV) section of the Interview. TaxCut will guide you through the steps you need to take to correctly report it.
For more information, see the Schedule D instructions.