What was originally supposed to go from September 27, 2010 until the end of last year, the US Federal Government made a provision to further exempt any gains made from Qualified Small Business Stock until the end of 2011.
Qualified Small Business Investments are defined as follows:
- Investments of individuals or partnerships in stock of a regular C corporation that has less than $50 million in assets
- Stock that is purchased directly from the corporation and held for at least five years
- The amount of gain under this law is limited to the greater of 10x the investment of $10 mio
- At least 80% of the corporation’s assets must be used to carry on a business or to conduct research or start-up activities
- Business cannot entail service, finance, mining, extraction, restaurant, and hospitality industries
- If an acquisition is made within the five-year holding period, the tax rules allow investors to hold the stock of the acquiring company to satisfy the five-year holding requirement
This law provides for a 0% tax rate on 100% of capital gains as oppose to the previous law of being taxed for the first 50% or 75%, and additionally removes the gain from the Alternative Minimum Tax calculation.
This has provided a quick turnaround with respect to funds provided by angels to entrepreneurs, which in turn allow them to grow their businesses and add new jobs to the economy. See article for further details.
Reposted from National Angel Capital Organization
Throughout his career, both in Canada and the UK, Bryan J. Watson has been a champion of entrepreneurship as a vector for the commercialization of advanced technologies. Upon his return to Canada in 2004, Bryan established his venture development consulting practice to help emerging-growth companies overcome the barriers to success they face in the Canadian commercialization ecosystem. Visit Bryan’s blog and the National Angel Capital Organization.
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