Navigating the tax code is tricky with just one Section but adding a second is a whole other ball game. The good news is that there is nothing that changes when reporting a traditional Section 1202 gain as opposed to a Section 1202 gain from a Section 1045 rollover. Even though this is true it is not easy to keep up with accurate documentation for more than one company. The taxpayer will need to keep documentation on the original QSBS as well as the replacement QSBS after rolling the gain into a new investment(s). In some cases, there are multiple rollovers, further increasing the complexity. The same documentation will need to be maintained for each investment. Find the documents needed below:
- Articles of Incorporation
- Stock Purchase Agreement
- At issuance: Tax Opinion Letter regarding classification of holdings as QSBS or certification from the company that it qualifies as an active qualified small business
- At sale: Tax Opinion Letter regarding evaluation and quantification of QSBS exclusion
- A Stock Sale Agreement
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.