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Small Business Stock

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What is the definition of Small Business Stock?
Shares issued by a qualified C Corporation whose gross assets do not exceed $50 million and uses at least 80% of its assets in the active conduct of one or more qualified trades or businesses. Noncorporate investors may exclude up to 50% of the gain realized on the sale of these stocks, provided the stocks were issued after August 10, 1993, and held for more than five years.
Using Small Business Stock in an Example

An investor purchases shares in a tech startup that qualifies as small business stock. After holding the shares for over five years, the startup significantly grows in value, and the investor decides to sell the shares. Due to the special tax provisions for qualified small business stock, the investor is able to exclude 50% of the gain from their income, significantly reducing their tax liability on the profit earned from the sale.

Using Small Business Stock in a sentence

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Related Terms

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A person whose spouse has died within the tax year and who may file a joint tax return for that year. Additionally, the surviving spouse can file joint returns for the next two years if they remain unmarried and maintain a household as the principal residence for a dependent child.
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Swap

A financial contract in which two parties agree to exchange streams of payments over a specified period, based on different indices such as interest rates, foreign exchange rates, or equity indices, applied to a notional amount. Swaps typically do not involve the exchange of principal.
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