by Bill Stukey, CPA, CVA

The “Tax Relief, Unemployment Insurance Reauthorization and Job Creation  Act of 2010,” includes an extension of the 100% exclusion from income of the  gain from the sale of qualifying small business stock acquired as discussed  below.

The above  Act contains a number of provisions aimed at encouraging investment in small  businesses.  These provisions include an amendment to Section 1202 of the  Internal Revenue Code of 1986, as amended (the “Code”), temporarily permitting  the exclusion of 100 percent of the gain from the sale of certain “qualified  small business stock” acquired after September 27, 2010 and before January 1,  2011 that is held for more than five years by a non-corporate taxpayer.   The new rule extends the deadline for purchasing “qualified small business  stock” by one year.

Qualifying small business stock must be acquired from a C corporation  whose gross assets do not exceed $50 million.  The amount of gain eligible for  the exclusion is limited to the greater of ten times the taxpayer’s basis in the  stock or $10 million of gain from stock in that corporation.

More  information about this potentially lucrative tax break is available on page 65  of IRS  Publication 550, Investment Income and Expenses.

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