Thinking about investing in a young, promising company? Section 1202 of the tax code offers a significant incentive for individuals to do just that.

What is Section 1202?

Section 1202 is a tax provision enacted in 1993 to encourage long-term investment in smaller startup companies. The aim of Section 1202 is to permit non-corporate shareholders to exclude from gross income 100% of the gain from a sale or exchange of “qualified small business stock” (“QSBS”) acquired after September 27, 2010 and held for more than five years. There is a cap on the exclusion amount available to a shareholder, which is the greater of $10 million of recognized gain, or ten times the adjusted basis of the QSBS per qualifying corporation.Continue Reading An Overview of Section 1202 Qualified Small Business Stock