Section 1045: Can QSBS Gain Be Rolled Into New Qualified Small Business Stock?
Section 1045 can allow qualifying gain on certain QSBS to be deferred when proceeds are reinvested in replacement QSBS under current law.
Why Section 1045 exists
An investor who disposes of qualifying small business stock before meeting the full Section 1202 holding period can sometimes defer gain by timely acquiring replacement QSBS.
Replacement requirement
The taxpayer must acquire qualifying replacement stock within the statutory window and satisfy the applicable requirements.
Basis effect
Deferred gain generally reduces the basis of replacement stock so the tax is preserved for a later event unless another provision applies.
Planning connection
Holding periods and qualification rules can interact with later Section 1202 eligibility, so both provisions should be analyzed together.
The takeaway
Section 1202 and Section 1045 solve different problems: one can exclude qualifying gain after the required holding period, while the other can defer gain through a qualifying rollover.
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FAQ
Is Section 1045 the same as Section 1202?
No.
Does replacement QSBS need to be acquired within a statutory period?
Yes.
Can deferred gain affect replacement-stock basis?
Yes.