Alternative minimum tax (AMT) is an "alternative" tax for people who are considered having higher income and was passed by congress in 1969 as a check to make sure taxpayers were not slipping out of their fair share of taxes. AMT recalculates taxable income by excluding some … Read More
As a holder of qualified small business stock (QSBS), it is important to know what steps to take not only when you report the Section 1202 exclusion on your taxes but also when the QSBS is issued. QSBS for some is a hidden secret embedded within the … Read More
The purpose of this case study is to give a real-world example of the potential benefits of the Section 1202 qualified small business stock (QSBS) exclusion on a QSBS holder and tax revenue level. Below is the QSBS Company Profile for Beyond Meat ("the Company" or "BM") … Read More
Reporting of the Section 1202 gain depends on (a) the tax form (b) whether it is owned through a pass-through entity, and (c) the timing of payments received from the sale of the QSBS. There are two forms (i) Form 1099-DIV and (ii) Form 2439. If the … Read More
For gains on the sale of stock to qualify for the Section 1202 capital gains tax exclusion, there are two main criteria on a stockholder level, which are (i) how the stock was acquired, (ii) how long the stock has been held, (iii) how the stock was … Read More
(a) Reorganization (1) In general For purposes of parts I and II and this part, the term “reorganization” means— (A) a statutory merger or consolidation; (B) the acquisition by one corporation, in exchange solely for all or a part of its voting stock (or in exchange solely for all or a … Read More
(a) General rule No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation. (b) … Read More
Section 1045 states that any "gain from such sale shall be recognized only to the extent that the amount realized on such sale exceeds the cost of any QSBS purchased by the taxpayer during the 60-day period beginning on the date of such sale, reduced by any portion … Read More
Section 1202(h)(4) states "the basis of such stock in the hands of the taxpayer shall in no event be less than the fair market value of the property exchanged", meaning that the property exchanged for QSBS is valued at fair market value (FMV) and not historical cost … Read More
Scenario I: QSBS exchanged for QSBS If QSBS was exchanged for other QSBS under a Section 351 transaction or a Section 368 Reorganization than the built-in gain on the transfer is eligible to be deferred under Section 1045 as well as any gain on the sale of the … Read More