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This is a little known tax loophole that allows you to profit from tax-free gains on qualified business stock.  

 

Qualified Business Stock must meet the following tests:

 

The company must be a C Corporation

  1. The company must be a C Corporation
  2. The corporation must have gross assets of 50 million or less
  3. The corporation has to use at least 80 percent of its assets in the active conduct of a qualified business
  4. The corporation cannot be a provider of personal services.  Permitted businesses include manufacturing, retailing, technology and wholesaling
  5. You must acquire the stock directly at its original issue in exchange for money or other property (not other stock) or for services provided.

 

To qualify for the tax exemption you generally must hold the stock for at least 5 years.  For stock acquired after September 27, 2010, you can exclude up to 100 percent of your gain, limited to 10 times the basis or 10 million (married filing jointly), whichever is greater. 

 

SWEET!  Now the question becomes where does one buy a qualified small business stock because you will not find it on the stock exchange.  

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