Under Section 1202(a)(1) QSBS can be owned by any entity other than a C Corporation. Therefore, a trust, S Corporation, Partnership, or individual can own QSBS. The share gain of the gain received in the sale of QSBS can not exceed the interest that the shareholder, partner, … Read More
Venture Capital (VC) funds can elect the Section 1045 rollover, but there are some nuances between various situations. VC funds are structured as partnerships; therefore, the Section 1045 treatment will be parallel with most partnership structures. The IRS has laid out detailed guidelines over the treatment of … Read More
§ 1.1045-1 Application to partnerships. (a) Overview of section. A partnership that holds qualified small business stock (QSB stock) (as defined in paragraph (g)(1) of this section) for more than 6 months, sells such QSB stock, and purchases replacement QSB stock (as defined in paragraph (g)(2) of this section) may elect to apply section 1045. An eligible partner (as defined in paragraph (g)(3) of this section) of a partnership that sells QSB stock, may elect to apply section 1045 … Read More
For purposes of this article, we are referring to General Partners of venture capital (VC) firms or similar private equity investment funds. General Partners can accumulate capital gains from two main sources, i.e. (i) direct investments or (ii) carried interest. Generally, General Partners of VC firms will … Read More
If you have recently sold your QSBS with a realized gain before the five year holding period has concluded you may want to elect the Section 1045 rollover. After the stock is sold you have 60 days to reinvest your QSBS sale proceeds into one or more … Read More
The new QSBS corporation and the investor must meet all of the same requirements on the QSBS checklist as the original QSBS. There is one exception to the active trade or business test. The QSBS purchased through a Section 1045 rollover only has to meet the active … Read More
Section 1045(a)(1 & 2) explicitly states that the reinvested QSBS gain is limited to the cost of the new QSBS minus the cost of the original QSBS. If $1 million in QSBS was purchased in 2015 but was sold for $5 million in 2018 there would be … Read More
One of the main requirements of electing the Section 1045 rollover is that the original QSBS has to be held for at least 6 months. After the stock has been held for 6 months at anytime the QSBS holder can sell the stock and rollover the full … Read More
Section 1045 rollover for the deferral of QSBS gains has to meet the 60-day requirement. When convertible notes are acquired they are considered debt securities because it is a hybrid debt and equity, acting as interest-bearing debt until the note is converted to equity on the conversion … Read More
Combining the benefits of the Section 1202 capital gains tax exclusion and Section 1045 rollover gain nonrecognition can formulate the rocket fuel needed to boost your tax savings vehicle. Under Section 1202 a taxpayer is allowed a tax exclusion of $10 million or 10x the initial QSBS … Read More