| Publication 544 |
2001 Tax Year |
Sales of Small Business Stock
If you sell qualified small business stock, you may be able to roll
over your gain tax free or exclude part of the gain from your income.
Qualified small business stock is stock issued by a qualified small
business after August 10, 1993, that meets certain tests.
Rollover of gain.
You can choose to roll over a capital gain from the sale of
qualified small business stock held longer than 6 months into other
qualified small business stock. This choice is not allowed to C
corporations. If you make this choice, the gain from the sale is
recognized only to the extent the amount realized is more than the
cost of the other qualified small business stock bought within 60 days
of the date of sale. You must reduce your basis in the other qualified
small business stock by the gain not recognized.
Exclusion of gain.
You may be able to exclude from your gross income one-half your
gain from the sale or exchange of qualified small business stock held
by you longer than 5 years. This exclusion is not allowed to C
corporations. Different rules apply when the stock is held by a
partnership, S corporation, regulated investment company, or common
trust fund.
Your gain from the stock of any one issuer eligible for the
exclusion is limited to the greater of the following amounts.
- Ten times your basis in all qualified stock of the issuer
you sold or exchanged during the year.
- $10 million ($5 million for married individuals filing
separately) minus the gain from the stock of the same issuer you used
to figure your exclusion in earlier years.
More information.
For more information on sales of small business stock, see chapter
4 of Publication 550.
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