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Aggregate gross assets include:
- Cash
- Aggregate adjusted basis of other property held by the corporation.
(Section 1202(d)(2))
QSBS considers the tax basis of assets, which are generally reported on Schedule L of a corporation’s tax return (i.e. Form 1120). The value of assets would include intangible assets such as goodwill.
Basis is generally the amount of a company’s capital investment in property for tax purposes. Certain events may occur during the period of ownership which may increase or decrease basis, resulting in an “adjusted basis”. Basis is increased by items such as the cost of improvements that add to the value of the property. Basis is decreased by items such as depreciation and insurance reimbursements for casualty and theft losses.
The QSBS regulations specify a couple of other common questions regarding “Aggregate Gross Assets”:
- The adjusted basis of any property contributed to the corporation is determined based on the fair market value at the time of the contribution.
- All subsidiaries controlled by the corporation (i.e. more than 50% owned) shall be aggregated and treated as one corporation for QSBS purposes.
- If the Corporation was converted from an LLC or other legal structure to a C Corporation the assets will have to be stepped up to FMV and there could be goodwill or intangibles reported, which will increase the basis of the assets on the balance sheet.
More on the “Gross Assets” Tests
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.
