By Jyothi Chillara, CPA, Principal
Section 1202 of the Internal Revenue Code is gaining greater interest from shareholders and investors in start-ups and small businesses. It offers favorable tax treatment for capital gains to those holding qualified small business stock (QSBS). A qualified small business (QSB) is an active C corporation with assets of less than $50 million at the point of or immediately after the issuance of stock.
According to IRC Section 1202, QSBS holders may have gains of 50 percent to 100 percent excluded from their tax obligations, depending on the date the stock was acquired. The exclusion is generally limited to either $10 million or 10 times the taxpayer’s basis in the stock, whichever is greater. (more…)