Goldburd | Goldburd McCone LLP

For nationwide tax guidance, call:
212-302-9400 or toll-free at 844-653-2873.

Goldburd | Goldburd McCone LLP

For nationwide tax guidance, call: 212-302-9400 or toll-free at 844-653-2873.

Serving Individual And Corporate Tax Clients Nationwide From Our New York, New Jersey, Florida And California Offices

Steven Goldburd and Benjamin A Goldburd

Since 1983, our tax firm has skillfully represented individuals and corporations across the United States and around the globe from our offices in New York, New Jersey, California and Florida.


On Behalf of | Feb 9, 2016 | Tax Strategies

As I keep saying over and over and over again, the Tax Code is a thrilling read. Explosive, filled with intrigue, laced with twists turns and shocks , and wondrous romance. Ok, it’s not any of those things, and its mostly filled with heartache. BUT in 2016, this bestselling code has got a little gift to give to its readership.

Entrepreneurs, angels and investors should take notice of Sec 1202 of the code, a small-business stock capital gains exclusion that was kind of loosey goosey until now. Here’s how it works: Sec 1202 encourages investors to buy stock in a “qualifying” corporation with gross assets not more than $50 Million before and immediately after a stock issuance. Certain gains on such investment, once held for 5 years, is 100% excluded  from taxation with no offset from AMT. This means shielded from taxes, nada, zip, zilch to Uncle Sam. This is no small amount either, the maximum exclusion is 10 times the investment or $10 Million for each qualifying investment made. This means that an investor can invest in multitude of qualifying corporations and continue to get this exclusion over and over again.

But that’s not all! If you call within the next 60 days you will get Sec 1202 AND Sec 1045, a combined value of more than a dollar absolutely free! Sec 1045 allows an investor to legally shelter the gain of the sale of Sec 1202 stock, if within 60 days it is reinvested in another qualified business stock. This mean a savvy investor can cut out his $10 Million gain tax free, and reinvest any gain above it into another company, continuously snipping away at the exclusion amount, essentially deferring taxable gains indefinitely.

Let’s take a small example of the possibilities:

Alpha invests $1 Million in Startup for a 10% equity stake at a straight line valuation ($10 Million). Startup is acquired by Google after five years for $100 Million. Alphas stake is now worth $10 Million a $9 Million gain. Under typical Long Term Capital Gains rates ( 20% & 3.8% NIIT) the taxable amount is about $2.2 Million which is a hefty price on such a risky startup investment that Alpha waited 5 years to realize any benefit. Under Sec 1202 this gain is non taxable allowing Alpha to ride into the sunset with all his money his own. Pretty cool no? Just think of the possibilities when we add Sec 1045 into the mix…oooooh …look I just got chills.

Company owners, and investors should speak to their respective tax advisors to analyze the company as there are special requirements to “qualify” and any ongoing compliance with continued investments in these types of ventures. As always I am available for coffee to discuss 🙂 .

Happy Hunting!

Benjamin Goldburd is an Associate at Goldburd McCone LLP a boutique tax law firm in New York City and Long Island.

For more information on these and other tax issues feel free to contact our offices at 212-302-9400, or on the web at