A beneficial tax provision to exclude 100% of the gain from the sale of qualified small business stock (QSBS) was recently extended for two years by the American Taxpayer Relief Act of 2012. Use of this provision allows noncorporate taxpayers to exclude from gross income 100% of gain (limits apply) from the sale or exchange of QSBS acquired after September 27, 2010, and before January 1, 2014.
Status as a qualified small business corporation is not a matter of choice (i.e., no election is required), but an opportunity to save taxes if the fairly restrictive qualification requirements can be met. The major problems with qualification are limits on the size of the business, types of eligible businesses, and types of assets a corporation can have and still meet the definition of a qualified small business. S corporation shareholders do not qualify for the gain exclusion.
Please contact Martini, Iosue & Akpovi by phone at (818) 789-1179 if you have questions or want more information on this tax-saving opportunity.