Small Business Stock Gains: Exclusion and Deferral Opportunities 2024

Overview

Review the availability and application of three special rules that allow exclusion or deferral of gain from the sale of the stock of a corporation not making the S corporation election. IRC 1202 provides that all or part of the gain from the sale of “qualified small business stock” can be excluded from gross income. IRC 1045 describes situations when the gain from the sale of “qualified small business stock” can be deferred. To understand the application of these two favorable provisions, the meaning of “qualified small business stock” and other requirements and limitations must be understood. IRC 1042 allows the deferral of gain from the sale of corporate stock to an employee ownership plan ( ESOP). This deferral requires a qualified reinvestment in an adequate amount at the right time. Study how these three provisions apply in the context of tax planning for corporate businesses.

Highlights

• IRC 1202-The benefit of the exclusion • IRC 1202-The requirements that must be met • IRC 1202-Limitation on the amount of the exclusion • Comparison of the IRC 1202 exclusion to making S corporation election • IRC 1045-The benefit of the deferral • IRC 1045-The requirements that must be met • The basics of Employee Stock Ownership Plans (ESOP) • IRC 1042-The benefit of the deferral • IRC 1042-The requirements that must be met

Prerequisites

Knowledge in taxation.

Designed For

CPAs and attorneys

Objectives

• Determine the benefit of the IRC 1202 exclusion • Identify the Section 1202 requirements that must be met and the limitation on the amount of the exclusion • Determine the benefit of IRC 1045 deferral • Identify the requirements that must be met to qualify for IRC 1045 deferral • Determine the benefit of the IRC 1042 deferral • Identify the requirements that must be met to qualify for IRC 1042 deferral

Preparation

None