Search Results for: what is qsbs
Section 1244 Unlocks Ordinary Loss Treatment for Qualified Small(er) Businesses
Section 1244 losses from certain small business stock allows an individual or married taxpayer to take a $50k or $100k capital loss, respectively, as an ordinary loss annually. How are Qualified Small Businesses similar and different between Sections 1202 and 1244? What is the impact on taxes with … Read More
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What is the Net Investment Income Tax (NIIT)?
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
What are the Capital Gains Tax Rates?
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
An example of a Section 351 tax-free transaction
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
How Much is “Substantially All”?
The term “substantially all” is used several times in the QSBS criteria per Section 1202, but how long is “substantially all”, could it be a simple majority of the time held, or does it need to be longer? While “substantially all” is not defined in terms of a … Read More
What if the Corporation Wasn’t Always a C-Corp?
In order to qualify as QSBS, the corporation has to be a C-Corp on the investment date, but not before. If the business was formed as a different legal structure (e.g. LLC, S Corporation, Partnership), the company can terminate its legal structure to re-incorporate as a C-Corp before … Read More
How do you tell if a Company is a C-Corp?
To become a C-Corp, a company must file Articles of Incorporation with the Secretary of State and file IRS Form SS-4 to obtain an employer identification number (EIN). A few indications that the Company is likely a C-Corp include: Name ends with either the identifier “Incorporated” or “Corp”.Business … Read More