Federal Tax

Small Business Corporation Stock: Special Tax Incentives (Portfolio 760)

  • The Portfolio, Small Business Corporation Stock: Special Tax Incentives, describes a number of Code provisions providing special incentives to invest in small businesses.

Description

Bloomberg Tax Portfolio, Small Business Corporation Stock: Special Tax Incentives, No. 760, describes a number of Code provisions providing special incentives to invest in small businesses. Its principal emphasis is the three provisions benefitting various small business corporations. Section 1045 allows the tax-deferred rollover of gain realized on the sale of stock in one qualified small business corporation into stock of another qualified small business corporation. Section 1202 allows a significant, generally 50%, exclusion for gains recognized with respect to stock of qualified small business corporations. Neither of these two is available for investments in S corporations. Section 1244 allows ordinary loss treatment with respect to the stock of small business corporations, both C corporations and S corporations. In addition, this Portfolio describes two provisions of the Code that grant preferential treatment to investments in small business investment companies, which are a class of specialized investment vehicles defined in the Small Business Investment Act. The first provision, §1044, allows the tax-deferred disposition of publicly traded securities to the extent that the proceeds are used to purchase investments in specialized small business investment companies. The second provision, §1244, grants ordinary loss treatment for losses sustained with respect to stock in small business investment companies.

Table of Contents

I. Small Business Corporations – Introduction
II. Section 1244
III. Section 1244 Stock
IV. Additional § 1244 Requirements for Stock Issued On or Before November 6, 1978
VI. Section 1244 and Transfers of Property with Basis in Excess of Value
VII. Record Keeping and Information Requirements Under § 1244
VIII. Rollover of Gain Under § 1045
IX. Partial Gain Exclusion Under § 1202
X. Operating Rules in § 1045 and 1202
XI. QSB Stock
XII. Investments in Small Business Investment Companies

polito-anthony-2015
Anthony Polito
Assistant Professor of Law
Suffolk University Law School
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