Forbes: IRS Limits Qualified Small Business Stock Tax Exclusion (January 31, 2022)

Forbes has published an article, “IRS Limits Qualified Small Business Stock Tax Exclusion”, which discusses a tax provision from the IRS that enables taxpayers to exclude capital gain on the sale of qualified small business stock (QSBS) if certain conditions are met.. The article begins as follows: 

After issuing a series of taxpayer-friendly rulings, the IRS recently issued guidance limiting the scope of section 1202. Section 1202 is the tax provision that enables taxpayers to exclude capital gain on the sale of qualified small business stock (QSBS) if certain conditions are met. As summarized in a prior article, section 1202 allows individuals to exclude from gross income the greater of $10 million or 10 times their initial investment in their company, with the potential to exclude up to $500 million of gain. This is one of the most powerful gain exclusion provisions in the Internal Revenue Code.

The most recent guidance came in the form of a Chief Counsel Advice Memorandum, CCA 202204007 (November 4, 2021), which was released on January 28, 2022. This type of advice comes from the National Office of the IRS Office of Chief Counsel, which is headquartered in Washington, D.C. It is written advice that is issued to employees of the IRS, and while it does not technically have the force and effect of law, i.e., it is not “precedential” in tax jargon, it conveys the legal interpretation of the Office of Chief Counsel.

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Posted by Anthony Tran, Associate Editor, Wealth Strategies Journal

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