If a taxpayer’s capital gains exceed the QSBS limitations, the gain above the limitation will be subject to capital gains taxes at a maximum rate of 28%. Additionally, the additional gains could be subject to Net Investment Income Tax (NIIT) of 3.8% for high earning taxpayers. As an example, ABC, Inc. issued $2 … Read More
In addition to capital gains taxes, if an individual’s income exceeds a certain threshold they will also be subject to a Net Investment Income (NIIT). NIIT is an additional 3.8% tax on certain net investment income of individuals and certain trusts or estates who meet a Modified Adjusted Gross Income … Read More
The long-term (assets held over 12 months) capital gains tax rates during 2020 are: Capital Gains Tax Bracket 0%: Income between $0 – $39,37515% : Income between $39,376 – $434,55020%: Income over $434,55028%: Maximum Tax Rate on Section 1202 QSBS Gains that are not excludable More on calculating your QSBS exclusion Read More
In 2012, ABC Corp raised $20 million in funding with an investor leading the round with a $5 million investment. The newly issued stock qualified as QSBS. Three years later the ABC Corp was acquired under a Section 351(a) tax-free stock exchange transaction. The acquirer exchanged newly issued non-QSBS for 100% … Read More
Not sure if the stock you’re invested in is QSBS, learn more about our QSBS Monitoring Platform In a merger, the QSBS qualification and holding period will be maintained if the merger is considered a tax-free stock transfer as (1) a section 351 stock exchange or (2) a section 368 reorganization. The … Read More
Gains on stock sold in under five years would not be considered “eligible” for QSBS tax treatment, and the capital gains will be taxed at the individuals capital gains rate. However, an alternative is to roll the sale proceeds into another company qualifying for QSBS, electing section 1045. More … Read More
The required holding period for Section 1202 QSBS starts the day the stock is acquired/issued. If stock was acquired through other securities such as convertible debt or stock options, the holding period for QSBS generally starts on the date the securities are converted to the stock. The following list shows … Read More
The transfer of QSBS through a gift or estate is considered a tax-free transfer for QSBS and maintains the tax exclusion upon transfer (Section 1202 (h)). Given the differing tax treatment of various types of gifts, it can become important to understand various differences in ways “gifts” are made when planning, … Read More
Individuals and “pass-through” entities can benefit from QSBS tax savings, but corporations investing in otherwise QSBS eligible entities cannot. A pass-through or flow-through entity is a legal structure that does not pay income taxes at the business level but passes earnings to its owners to be taxed at … Read More
QSBS can only be purchased directly from the qualifying QSBS C Corporation at its original issue. Therefore, stock that would otherwise qualify as QSBS loses this favorable status after it has been purchased through a secondary sale. QSBS can be acquired through: An exchange for any property, not including stock. QSBS … Read More