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Tax Relief for Small Business Investors

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
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