New Corporation Formation

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January 03, 2020

by a searcher from University of Pennsylvania - The Wharton School in San Francisco, CA, United States

Any lawyers or tax professionals here that can help me with a formation question? I specifically want to understand if we can organize a new entity as a C or S corp to take advantage of the Qualified Small Business Stock opportunity.

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Reply by a professional
from Northwestern University in St. Louis, MO, USA
In certain cases, corporate stock is permitted to be sold without any federal income tax being incurred. Application of the exclusion requires the meeting of certain tests, including: (i) the issuer of the stock being a C corporation; (ii) a selling shareholder who is not a corporation; a holding period in the stock of at least five years; (iii) a maximum exclusion amount per year per issuer of the greater of $10 million or 10 times the aggregate adjusted basis of the disposed of stock; original issue stock; (iii) the assets of the issuer not having exceeded $50 million on, before, or immediately after the issuance; and (iv) 80 percent or more of the assets of the issuer being used in the active conduct of a qualified trade or business. Qualified trades or businesses generally exclude personal services businesses, banking, insurance, financing, leasing, investing, farming, mining, and operating a hotel, motel, or restaurant.
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Reply by a professional
from Walsh College of Accountancy and Business Administration in Detroit, MI, USA
Neil, here is an article on section 1202 stock that my colleague wrote. Must be a C-Corp. Glad to set up a call to discuss more about it. Send me an email at redacted style='text-decoration:underline;' target='_blank' href='https://www.plantemoran.com/explore-our-thinking/insight/2017/07/taxable-gain-exclusion-boosts-after-tax-roi-on-qualified-investments'>https://www.plantemoran.com/explore-our-thinking/insight/2017/07/taxable-gain-exclusion-boosts-after-tax-roi-on-qualified-investments
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