In September of 2014,Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000.She had held the stock for 7 months.Forty-five days after the sale she purchased other qualified small business stock for $1,100,000.What is the basis in the new stock she purchased?

Question

Quizplus · Accepted Answer

To qualify for the small business stock exclusion, a taxpayer must hold the stock for at least five years. Since Michelle only held the original stock for seven months, she cannot take advantage of the exclusion. However, she can defer the gain under Section 1045 by purchasing other qualified small business stock within 60 days of the sale. The basis in the new stock is equal to the basis of the stock sold minus the gain deferred, which is $1,000,000 - $200,000 = $800,000. Therefore, the basis in the new stock is $1,100,000 - $800,000 = $300,000.

In September of 2014,Michelle Sold Shares of Qualified Small Business