Rolling Over the Gain on Small Business Stock to Other Small Business stock

Another tax benefit connected with qualifying small business stock is being able to:

  • Defer a gain (put off having to pay taxes on the gain) on qualifying small business stock held for more than six months.

If you sell qualifying small business stock held more than six months at a gain, you can rollover the gain tax free to other qualified small business stock.

The rules:

  • The rollover must be made within 60 days of the sale.
  • Your basis in the small business stock acquired during the 60-day replacement period is reduced by the amount of the deferred gain.
  • If the reinvestment in a qualifying small business is for less than the sale proceeds, your gain is taxed to the extent of the difference.

Reporting a Rollover of Gain From Qualified Small Business Stock

If you elect to defer the gain:

FIRST:

On Schedule D-

  • Report the entire gain in Part I, if a short-term gain or
  • Part II, if a long-term gain.

THEN:

  • Directly below the entry you made in Part I or Part II, write the following:
    • "Section 1045 Rollover"
  • Report the rolled-over amount as a loss in column (f).

Make the election to defer the gain by the due date or extended due date for your return.

If you miss the due date, file an extension no more than six months after the original due date.

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