You’re not going to believe this, but if you acquire Qualified Small Business Stock (“QSBS”) between September 30, 2010 and December 31, 2011 you can exclude up to $10 million in capital gains when you sell it.
Do I have your attention? Basically, if you have an active trade or business in a specific industry (can’t be a professional service company, in real estate, investments, etc.) that is taxed as a C Corporation, has original issue stock between September 30, 2010 and December 31, 2011 and you hold the stock for at least five years – you can exclude up to $10 million in capital gains with out any AMT preference. This means completely tax free.
Also, if you sell the stock before the five year holding period is satisfied you can “roll” it into another QSBS.
We love this strategy. Initially, it was going to expire at the end of 2010, but the Tax Relief Act extended the provision. Every business should consider if this provision has a potential benefit. Additionally, the government is seriously considering making this a permanent tax cut which means more opportunities may be available going forward.
If you have not considered this provision, please contact us so that we can determine if this is a viable tax strategy for you and the potential tax savings.