Gain on Stock Not Eligible for Exclusion

Gain on the sale of qualified small business (QSB) stock may be 100% tax free up to $10 million if certain conditions are met. One of these is holding the stock for more than 5 years. Unfortunately, one taxpayer, an inventor, with QSB stock couldn’t exclude gain on the majority of his shares because he failed this holding period. Note: The 100% exclusion only applies to QSB stock issued after September 27, 2010; a smaller exclusion applies to earlier shares. Details about QSB stock are in the instructions to Schedule D of Form 1040. #IdeaoftheDay