Under the tax rules for qualified small business stock (QSBS), you can exclude 100% of the gain on the sale of the stock held more than five years. To qualify, the following requirements must be met.
- The stock must have been issued after August 10, 1993
- The stock could not have been acquired in exchange for other stock
- The issuing corporation must be a C corporation
- At least 80% of the corporation’s assets must be used in the active conduct of a qualified trade or business.
- Certain businesses such as those involving real estate or personal services (e.g. law, health, financial services, etc.) are ineligible.
- The corporation can’t have more than $50 million in assets at the time the stock was issued.
TIP: The QSBS break, which had expired and been resurrected several times, was made permanent by the Protecting Americans from Tax Hikes Act. PATH