O% Tax on Qualifying Small Business Stock

November 15, 2011 by Mike Verville

The “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010,” includes an extension of the 100% exclusion from income on gains resulting from the sale of qualifying small business stock.

The Job Creation Act of 2010 contains a provision that amends Section 1202 of the Internal Revenue Code of 1986.  The amendment temporarily permits the exclusion of 100 percent of the gain from the sale of certain “qualified small business stock” acquired after September 27, 2010 and before January 1, 2012.  The stock must be held for more than five years by a non-corporate taxpayer.

Qualifying small business stock must be acquired from a C corporation.  Gross corporate assets must not exceed $50 million.  Gains eligible for the exclusion are limited to the greater of ten times the taxpayer’s basis in the stock or $10 million of gain from stock in that corporation.

Before you purchase Qualified Small Business Stock, you may want to ask your CPA about the tax consequences regarding the investment.  As always, feel free to contact a professional at  Wallace Neumann & Verville, LLP  for guidance regarding the tax consequences of investing in Qualified Small Business Stock.

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