Section 1202 Qualified Small Business Stock: Maximizing Tax Advantages of Gain Exclusion and Deferral

Leveraging QSBS Code Provisions Including 1244 Ordinary Loss Treatment

Recording of a 110-minute CPE webinar with Q&A

Conducted on Thursday, August 27, 2015

Recorded event now available

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Program Materials

This webinar will offer tax advisers and professionals an exploration of IRC Section 1202 qualified small business stock (QSBS). The webinar will detail the gain exclusion rules of Section 1202, and will describe the types of business entities that qualify as QSBS companies. The panel will also discuss the tax deferral provisions contained in Section 1045 for rollovers in qualified small business stocks, and the Section 1244 ordinary loss treatment with respect to QSBS losses. Finally, the webinar will offer guidance on the reporting requirements and planning opportunities related to QSBS.


The Internal Revenue Code provides significant tax benefits for buyers and owners of qualified small business stock (QSBS). Owners of such stock, as defined by Section 1202, can exclude up to 100% of eligible realized gain upon sale of the QSBS after meeting the five-year holding period. For investors funding startup companies, the 1202 exclusion can provide a significant tax savings

In addition to the gain exclusion found in 1202, there are other tax incentives attached to small business stock ownership. Section 1045 allows taxpayers nonrecognition treatment for gain on any sale of QSBS when the proceeds are rolled over into another QSBS. The rollover provision can be extremely beneficial for business owners who want to sell their company and start a new business; by meeting the rules found in 1045, that business owner can defer tax on the gain arising from the sale of the existing business.

Another significant tax benefit of owning QSBS is the Section 1244 allowance to treat certain QSBS losses as ordinary losses. While the rules under Section 1244 are complex, these provisions can provide tax savings to business owners and investors.

Listen as our expert panel details the rules, benefits, reporting mechanics and planning opportunities of Section 1202 QSBS. 



  1. Qualified small business stock (QSBS)
    1. Entities eligible for QSBS treatment
    2. Section 1202 cap gains exclusion rules
  2. Section 1045 rollover gain deferral rules
  3. Section 1244 ordinary loss treatment on QSBS
  4. Entities eligible for small business treatment
  5. AMT recaptures
  6. Section 1202 reporting requirements
  7. Planning considerations for QSBS 


The panel will discuss these and other important topics:

  • What types of entities qualify—and do not qualify—for preferential treatment under Section 1202?
  • What are the mechanics of the gain exclusion calculations upon sale of Section 1202 stock?
  • What are the rules and qualifications for the rollover deferral provisions under Section 1045?
  • What are the requirements to achieve ordinary loss treatment on the disposition of QSBS under Section 1244?
  • How does the AMT effect small business stock tax incentives?


Karachale, Christopher A.
Christopher A. Karachale

Senior Counsel
Hanson Bridgett LLP

Mr. Karachale advises individuals and business entities on a broad range of tax planning and tax controversy matters....  |  Read More

Leung, Raymond L.
Raymond L. Leung, CPA

Managing Partner
Leung Louie Ip & Co.

Mr. Leung has over 25 years of personal and corporate income tax and financial consulting experience with a special...  |  Read More

David Strong
David Strong

Morrison & Foerster

Mr. Strong is co-chair of the Federal Tax Practice Group and the Tax Department at his firm and is also the managing...  |  Read More

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