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 a $4 million realized gain that could be rolled over with Section 1045. It is eminently possible that the taxpayer struggles to find $5 million in notable QSBS to reinvest within the 60 day period. Let’s say that the investor can only reinvest $3 million of the $5 million proceeds; therefore, the deferred gain would be $2 million ($3 million – $2 million) and the taxpayer would pay capital gains taxes of $476,000 ($2 million x 23.8%) on the $2 million recognized gain.

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