Final answer:
The holder of qualified small business stock acquired after September 27, 2010 may exclude 100% of any gain from the sale or exchange of such stock. Only noncorporate shareholders qualify for the exclusion. To qualify for the exclusion, the taxpayer must have held the stock for more than 5 years and must have acquired the stock as part of an original issue. A qualified small business corporation is a C corporation whose aggregate gross assets did not exceed $50 million on the date the stock was issued and at least 80% of the corporation's assets must be used in the active conduct of one or more qualified trades or businesses.
Step-by-step explanation:
The exclusion for qualified small business stock is a tax incentive allowing noncorporate shareholders to exclude 100% of gains from selling or exchanging such stock if held for more than 5 years from the original issue. This encourages long-term investment in small businesses.
To qualify, the issuing corporation must be a C corporation with total gross assets not exceeding $50 million at the time of stock issuance. Moreover, at least 80% of the corporation's assets must actively engage in qualified trades or businesses, promoting the growth of enterprises directly involved in productive activities. This provision aims to foster entrepreneurship and innovation by incentivizing investment in small, promising companies.
By offering substantial tax benefits for qualifying investors, it supports economic growth, job creation, and the expansion of innovative ventures, contributing to the overall dynamism of the economy.
Correct answer: 100%; Only noncorporate; 5; an original issue; $50; 80%