On September 27, 2010, President Barack Obama signed the Creating Small Business Jobs Act of 2010 (SBJA) that contains a temporary amendment to Internal Revenue Code (IRC) Section 1202 that permits an eligible corporation’s stock (known as Qualified Small Business Stock or QSBS) to be sold by the QSBS original issue shareholders without being taxed on the stock sale. The temporary amendment applies only to certain stock acquired after the enactment date of the SBJA and before January 1, 2011.
In general, each QSBS may exclude gain in the amount of the greater of $10 million or ten times the adjusted basis in the corporation. With the impending sunset of the 15 percent capital gains tax rate at the end of 2010, this 100 percent exclusion from capital gains taxes (as well as the alternative minimum tax) would be a very big financial windfall to business owners with QSBS.
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For previous coverage of the Small Business Act in Advisor’s Journal, see President Obama Signs the Small Business Jobs and Credit Act (CC 10-61) & Small Business Bill Extends the Roth Conversion Window (CC 10-64).
For in-depth analysis of the taxation of income from property dispositions, see Advisor’s Main Library: Section 19 B3—Income From Property Dispositions: Gains And Losses
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