Section 1202 QSBS Exclusion

§ 1202. Partial exclusion for gain from certain small business stock(a) Exclusion(1) In generalIn the case of a taxpayer other than a corporation, gross income shall not include—(A) except as provided in paragraphs (3) and (4), 50 percent of any gain from the sale or exchange of qualified small business stock acquired on or before the applicable date and held for more than 5 years, and (B) the applicable percentage of any gain from the sale or exchange of qualified small business stock acquired after the applicable date and held for at least 3 years. (2) Empowerment zone businesses(A) In generalIn the case of qualified small business stock acquired after the date of the enactment of this paragraph in a corporation which is a qualified business entity (as defined in section 1397C(b)) during substantially all of the taxpayer’s holding period for such stock, paragraph (1) shall be applied by substituting “60 percent” for “50 percent”. (B) Certain rules to applyRules similar to the rules of paragraphs (5) and (7) of section 1400B(b) (as in effect before its repeal) shall apply for purposes of this paragraph. (C) Gain after 2018 not qualifiedSubparagraph (A) shall not apply to gain attributable to periods after December 31, 2018. (D) Treatment of DC zoneThe District of Columbia Enterprise Zone shall not be treated as an empowerment zone for purposes of this paragraph. (3) Special rules for 2009 and certain periods in 2010In the case of qualified small business stock acquired after the date of the enactment of this paragraph and on or before the date of the enactment of the Creating Small Business Jobs Act of 2010—(A) paragraph (1)(A) shall be applied by substituting “75 percent” for “50 percent”, and (B) paragraph (2) shall not apply. In the case of any stock which would be described in the preceding sentence (but for this sentence), the acquisition date for purposes of this subsection shall be the first day on which such stock was held by the taxpayer determined after the application of section 1223. (4) 100 percent exclusion for stock acquired during certain periods in 2010 and thereafterIn the case of qualified small business stock acquired after the date of the enactment of the Creating Small Business Jobs Act of 2010 and on or before the applicable date—(A) paragraph (1)(A) shall be applied by substituting “100 percent” for “50 percent”,11 So in original. The comma probably should be followed by “and”. (B) paragraph (2) shall not apply. In the case of any stock which would be described in the preceding sentence (but for this sentence), the acquisition date for purposes of this subsection shall be the first day on which such stock was held by the taxpayer determined after the application of section 1223. (5) Applicable percentageThe applicable percentage under paragraph (1) shall be determined under the following table: Years stock held:Applicablepercentage: 3 years50% 4 years75% 5 years or more100%