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Imagine selling your business (C-corporation only) for a gain of around $7 million and paying no taxes. That’s right – as long as you operated your business as a Qualified Small Business Corporation (QSBC) and you owned the business for more than five years, you don’t have to pay any federal income tax on the resulting gain.

Limitations on Excludable Gains 

Of course, there are limitations to the excludable gain. The tax-free gain is limited to the greater of:

Definition of QSBC Stock 

To be eligible, the stock you acquired must meet the following requirements of Section 1202 of the Internal Revenue Code:

Rules for the Corporation

To be eligible, the corporation must meet the following requirements:

Note – This blog post does not cover all the applicable rules. But we wanted to offer an idea of how this planning opportunity can provide huge tax savings. Feel free to reach out to us if you want to learn more about section 1202 capital gain exclusion.