Revenooer Rants: Venture investors running out of time
November 13, 2013
Unless Congress acts — and with alacrity (historically almost unheard of) — folks who invest in certain small corporations and want to take advantage of a freebie when they sell out must make those investments before Dec. 31, 2013.
That's because present law allows exclusion of 100 percent of gains realized from the sale of stock in certain companies: qualified small business stock (QSBS). The exclusion will fall to only 50 percent for QSBS acquired January 1, 2014 or later.
And to add insult to injury, the alternative minimum tax rules will also tighten relative to later gains on the sale of QSBS.
So, just what is QSBS, you ask. It is stock which fulfills these conditions:
• It must be stock issued by a "C" corporation originally issued after 1993.
• When the stock was issued, the corporation had to be a domestic "C" corporation with total gross assets of $50 million or less.
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• Shareholders must have acquired the stock at the time of its original issuance.
• During the shareholder's holding period of his stock, the corporation remained a "C" corporation; at least 80 percent of the corporation's assets were used in the "active conduct" of a qualified business; and the corporation was not a foreign corporation.
Current law allows for an exception to the treatment of a portion of the excluded gain as an AMT tax preference, but if the stock is acquired after next New Year's Day, the AMT preference rule will apply.
Get on the ball, if you're considering acquisition of some QSBS stock!
And from our "whoops" department came word, this week, of a little gaffe by the great state of Nevada relative to its obligation to collect and pay over to IRS a whole bunch of payroll taxes — something like $1.7 million worth, to be more precise!
Uncle Sam, you see, has required state and local governments to pay into Medicare since 1986 — about a quarter of a century ago. But now we hear that judges and members of boards and commissions have somehow been overlooked by the state with respect to this obligation.
Until now. So, the state fessed up and the Revenooers, being the kindly souls they are, have waived penalties and interest! That's right — they pound we and thee when an "oversight" occurs, but not the sovereign state of Nevada!
According to budget director Jeff Mohlenkamp, says the Associated Press, the state plans to front the employee share of this settlement (half of the total), and then go back to those beleaguered employees and get the money back from them over a three year period — assuming they can find them all, given the likelihood that some have long since left.
CONSULT YOUR TAX ADVISER — This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He can be reached at 775-831-7288, welcomes comments at firstname.lastname@example.org, and invites readers to consider his other commentaries at http://blog.nolo.com/taxes.