Tax Developments Affecting Privately Owned Businesses And Their Owners

The taxation of privately owned businesses and their owners is always in flux. Several developments are worthy of note:

Small Business Jobs and Credit Act

On September 27, 2010, the Small Business Jobs and Credit Act (the "Act") became law. Among its key provisions are the following:

• One hundred percent (100%) of the capital gain from the sale of "qualified small business stock" is excluded from both regular capital gains tax and alternative minimum tax ("AMT") if the stock is acquired through a new investment in a "qualified small business" made before January 1, 2011. A "qualified small business" is a C corporation running an active business with assets not greater than $50 million. The stock must be held for at least five years before sale to qualify for the exclusion. This is a very short time frame within which to develop a meaningful business plan and attract investors, but does present an opportunity.