What Are The Tax Advantages To Investing In Start-Up Or Early-Stage Enterprises?
If investors retain for at least five years securities that qualify as “small business” stock under the Internal Revenue Code, they may be able to obtain the beneficial tax treatment afforded to some capital gains by Internal Revenue Code Section 1202. This statute excludes from gross income a portion of the gain realized by an investor from the sale of qualified small business stock (as defined therein) held for more than five years. Under Section 1045 of the Internal Revenue Code, investors who sell stock that qualifies as small business stock under Section 1202 may roll over their gains into new qualifying stock on a tax-free basis. Investors can continuously defer taxation on qualifying small business stock capital gains by rolling over gains from one small business investment into another qualifying investment. Investors can continue to roll over such successive gains for an unlimited period. Recognizing that start-up stage investing is more risky than later stage investments, Con
