The Protecting Americans From Tax Hikes Act of 2015 (the
"PATH Act"), expected to be soon passed by Congress and
signed into law by President Obama, permanently extends the 100%
exclusion for gain recognized on the sale of Qualified Small
Business Stock ("QSBS").
Historically, investors that sold QSBS held for the requisite
five-year holding period were permitted to exclude 50% of the gain
recognized on such sale when computing their federal income tax
liability. This percentage was increased to 75% for stock purchased
in 2009 and 2010, and then to 100% for QSBS purchases made after
September 27, 2010 and before January 1, 2015 (prior to passage of
the PATH Act).
Many requirements must be met in order for an investor to
qualify for the favorable gain exclusion rule, many of which are
within the control of the issuer of the stock. For example,
the issuer of the stock must be a domestic C corporation, must use
at least 80% of its assets in a qualified trade or
