On December 18, 2014, President Obama signed into law H.R. 5771, which is the Tax Increase Prevention Act of 2014 (“TIPA”). As a result, the purchase deadline of the QSBS (defined below) has been extended until December 31, 2014 from December 31, 2013; therefore, purchases made last year may be eligible for 100% tax-free capital gains (Please consult an independent tax professional to see if your investment qualifies).
Celebrate the New Year by investing in that Qualified Small Business Stock (“QSBS”) before the ball drops and reap a potential 100% tax-free capital gains earned on the investment, pursuant to Section 1202(a)(4) of the Internal Revenue Code. Although we advise all readers to seek specific tax advice from a tax professional, we will summarize the salient terms:
- The QSBS must be purchased by December 31,
20132014 and held for 5 years prior to its sale (I.R. Code Sec. 1202(a)(4)), as amended by TIPA);
- The QSBS must be from a C-corporation, formed after 1993, valued at under $50 million in assets, and engaged in an active business (I.R. Code Sec. 1202(c)(2) & (d))