Partnerships can elect the Section 1045 rollover, but there are some nuances between various situations in terms of who has the authority to purchase replacement QSBS. The IRS has laid out detailed guidelines over the treatment of the Section 1045 rollover for partnerships. The guidelines are summarized below.
- If a taxpayer sells QSBS he/she can purchase new QSBS personally or through any partnership they are a partner of.
- If a partnership sells QSBS the partnership, eligible partner, or any other partnership owned, directly or indirectly through an upper-tier partnership, by an eligible partner that also is a partner in the selling partnership can repurchase QSBS.
- If a partnership repurchases QSBS they first have to notify all of the partners in case the partners choose to opt-out.
- If the partnership is structured as a lower-tiered partnership and the partnership sells QSBS and one of the partners is an upper-tiered partnership only an eligible partner in the upper-tiered partnership can repurchase QSBS on behalf of the lower-tiered partnership.