Originally Posted by jcentrepreneur
Something of a specialized question here.
In 12/2010, I converted my LLC (originally formed 9/2009) into a C Corp while raising capital from outside investors. It was suggested to me that my founders shares in this newly formed C. Corp would be excluded from capital gains based upon the 2010 Small Jobs Act and it's impact to 26 U.S. Code ? 1202 - "Partial exclusion for gain from certain small business stock". (https://www.law.cornell.edu/uscode/text/26/1202
I've read and re-read the code but am not confident in my interpretation. Can anyone offer any expert insight?
For taxpayers other than corps, Sec. 1202 excludes from gross income at least 50% of the gain recognized on the sale or exchange of qualified small business stock held more than 5 years;for qualifying stock acquired after Feb. 17, 2009, and on or before Sept. 27, 2010, the exclusion percentage is 75%, and for qualifying stock acquired after Sept. 27, 2010, and before Jan. 1, 2014, the exclusion percentage is 100%. The amount of the exclusion is 60% in the case of the sale or exchange of certain empowerment zone stock that is acquired after Dec. 21, 2000, and sold before 2015.
NOTE: Section 1202 of the TAX LAW provided a 50% exclusion from income of gains on the sale of stock of a qualifying small business held by an investor for more than 5 years. In recent years, this exclusion amount has been increased to 75% and then to 100%, but these higher exclusion rates have only been extended in short intervals. Now, thanks to the Protecting Americans from Tax Hikes Act, gains on qualifying small business stock obtained any time after Dec. 31, 2014 and onward are eligible for the 100% exclusion.