A Section 368 tax-free E reorganization or recapitalization can involve various structures, but the most commonly used structure for QSBS is a stock for stock exchange or assets for stock exchange. The tax-free reorganization will defer any gains recognized at the time of the sale until the … Read More
Under Section 1202(h)(4) the holder of QSBS can exchange their stock for other QSBS or non-QSBS stock when electing Section 351(a). Section 351(a) allows the holder to conduct a tax-free transaction, exchanging either corporate stock or property. Immediately after the exchange, the company issuing new stock in … Read More
Under Section 1202(a)(1) QSBS can be owned by any entity other than a C Corporation. Therefore, a trust, S Corporation, Partnership, or individual can own QSBS. The share gain of the gain received in the sale of QSBS can not exceed the interest that the shareholder, partner, … Read More
Venture Capital (VC) funds can elect the Section 1045 rollover, but there are some nuances between various situations. VC funds are structured as partnerships; therefore, the Section 1045 treatment will be parallel with most partnership structures. The IRS has laid out detailed guidelines over the treatment of … Read More
For purposes of this article, we are referring to General Partners of venture capital (VC) firms or similar private equity investment funds. General Partners can accumulate capital gains from two main sources, i.e. (i) direct investments or (ii) carried interest. Generally, General Partners of VC firms will … Read More
If you have recently sold your QSBS with a realized gain before the five year holding period has concluded you may want to elect the Section 1045 rollover. After the stock is sold you have 60 days to reinvest your QSBS sale proceeds into one or more … Read More
Under Section 1202(h)(1) inherited QSBS is considered a tax-free transfer, which maintains QSBS qualification to the transferee. If the inherited stock qualified for QSBS when it was acquired by the precedent holder than the stock will qualify for section 1202 QSBS. The transferor's holding period and basis … Read More
Individuals and pass-through entities are considered eligible investors for QSBS purposes. Venture Capital (VC) firms are formed under a limited liability partnership (LLP) legal structure, which is a pass-through entity. Therefore, limited partners (investors) in a VC firm will be able to take advantage of the Section … Read More
The timing of exercising stock options can vary from person to person and depends on whether your options are non-qualified (NQSO) or incentive stock options (ISOs). ISOs can only be granted to employees, unlike NQSOs that can be granted to anyone (i.e. contractors, employees, and directors). … Read More
Stock options could qualify for QSBS after they are exercised, but there are a few steps you should take before exercising your "QSBS stock options". If you are concerned about the tax implications of selling or exercising your QSBS stock options than you are in the right … Read More