§1045 — Rollover of gain from qualified small business stock to another qualified small business stock

4 cases·3 followed·1 questioned—75% support

Statute Text — 26 U.S.C. §1045

(a)Nonrecognition of gain

In the case of any sale of qualified small business stock held by a taxpayer other than a corporation for more than 6 months and with respect to which such taxpayer elects the application of this section, gain from such sale shall be recognized only to the extent that the amount realized on such sale exceeds—

(1)

the cost of any qualified small business stock purchased by the taxpayer during the 60-day period beginning on the date of such sale, reduced by

(2)

any portion of such cost previously taken into account under this section.

This section shall not apply to any gain which is treated as ordinary income for purposes of this title.

(b)Definitions and special rules

For purposes of this section—

(1)Qualified small business stock

The term “qualified small business stock” has the meaning given such term by section 1202(c).

(2)Purchase

A taxpayer shall be treated as having purchased any property if, but for paragraph (3), the unadjusted basis of such property in the hands of the taxpayer would be its cost (within the meaning of section 1012).

(3)Basis adjustments

If gain from any sale is not recognized by reason of subsection (a), such gain shall be applied to reduce (in the order acquired) the basis for determining gain or loss of any qualified small business stock which is purchased by the taxpayer during the 60-day period described in subsection (a).

(4)Holding period

For purposes of determining whether the nonrecognition of gain under subsection (a) applies to stock which is sold—

(A)

the taxpayer’s holding period for such stock and the stock referred to in subsection (a)(1) shall be determined without regard to section 1223, and

(B)

only the first 6 months of the taxpayer’s holding period for the stock referred to in subsection (a)(1) shall be taken into account for purposes of applying section 1202(c)(2).

(5)Certain rules to apply

Rules similar to the rules of subsections (f), (g), (h), (i), (j), and (k) of section 1202 shall apply.

Treasury Regulations

Treas. Reg. §Treas. Reg. §1.1045-1 Application to partnerships
Treas. Reg. §Treas. Reg. §1.1045-1(a) Overview of section.
Treas. Reg. §Treas. Reg. §1.1045-1(b) Partnership election—(1) Partnership purchase of replacement QSB stock.
Treas. Reg. §Treas. Reg. §1.1045-1(c) Partner election—(1) In general—(i) Rule.
Treas. Reg. §Treas. Reg. §1.1045-1(d) Nonrecognition limitation—(1) In general.
Treas. Reg. §Treas. Reg. §1.1045-1(e) Partnership distribution of QSB stock to a partner—(1) In general.
Treas. Reg. §Treas. Reg. §1.1045-1(f) Contribution of QSB stock or replacement QSB stock to a partnership.
Treas. Reg. §Treas. Reg. §1.1045-1(g) Definitions.
Treas. Reg. §Treas. Reg. §1.1045-1(h) Reporting and election rules—(1) Time and manner of making election.
Treas. Reg. §Treas. Reg. §1.1045-1(i) Examples.
Treas. Reg. §Treas. Reg. §1.1045-1(j) Effective date/applicability—In general.
Treas. Reg. §Treas. Reg. §1.1045-1(v) QSB stock of the same type.

4 Citing Cases

QUEST. Ralph E. Holmes, Petitioner T.C. Memo. 2012-251 · 2012

We are not convinced that he prepared and allowed the submission ofthe false documentto perpetuate a scheme formed at the time offiling his 2000- 04 tax returns to conceal taxable gain.

John Owen & Laura L. Haskell Owen, Petitioners T.C. Memo. 2012-21 · 2012

2003 tax year; (6) whether the Owens failed to include an employment termination payment from Amerus of $35Ò, Ô0O in their income for the 2005 tax year; (7) whÄther the Owens are entitled to defer $1, 867, 500 of capital gain from the sale of their stock in Family First Advanced Estate Planning (FFAEP) under section 1045.(a) ; and (8) whether the Owens are liable for the section 6662(a) accuracy-related penalties for the 2002 and 2003' tax years.

John P. & Laura L. Haskell Owen, Petitioner T.C. Memo. 2012-21 · 2012

J & L Owen, Inc., Petitioner T.C. Memo. 2012-21 · 2012