Qualified Small Business Stock (QSBS) has long offered significant tax benefits under Section 1202 for investors looking to reduce or eliminate capital gains tax on eligible startup investments. Lesser known, however, is Section 1045, which allows you to preserve QSBS eligibility by reinvesting QSBS proceeds into new … Read More
“Because of this bill, start-ups and small businesses will now have access to a big, new pool of potential investors -- namely, the American people.” - President Barack Obama during the signing of the JOBS Act, April 5, 2012 The Jumpstart Our Business Startups (JOBS) Act paved the way … Read More
Not sure if the stock you’re invested in is QSBS, learn more about our QSBS Monitoring Platform Section 1045 of the tax code defines how to perform a qualified rollover of Qualified Small Business Stock, or QSBS. Here are the basics of QSBS. A business must meet three qualifications to … Read More
QSBS + Stock Options = Maximized Returns If you are an employee or contractor and you have received stock options there are a few questions that are imperative to ask upfront (i) what are the tax effects, (ii) when should I exercise my stock options, (iii) do my … 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
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
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