The 2012 Taxpayer Relief Act retroactively extends the provision allowing noncorporate taxpayers to exclude 100 percent of the gain on the disposition of qualified small business stock (QSBS) acquired after September 27, 2010 and before January 1, 2014. Without this extension, the exclusion was to be limited to 50 percent of gain for stock acquired after December 31, 2011.
To qualify for the exclusion, the QSBS must be held for more than five years. The amount excluded is limited to the greater of $10 million or 10 times the original basis in the stock.
A qualified small business (QSB) is a domestic C corporation that meets the active business test and has aggregate gross assets of $50 million or less at all times before and immediately after the issuance of the stock. Qualified small business stock is QBS stock acquired by the taxpayer at its original issue (directly or through an underwriter) in exchange for money or property other than stock (e.g., no stock via reorganization allowed) or as compensation for services provided.
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