Insiders' Tax Break
Forbes (08/07/00) Vol. 166, No. 4 p.134; Ebeling, Ashlea

Marc Andreessen avoided paying capital gains taxes by utilizing Section 1045 of the Internal Revenue Service tax code. The rule is something of a mystery among most taxpayers. It states simply that a person can roll over capital gains from one small-business investment to another and defer tax collection. Eligibility requirements for the tax break require that a business launched after mid-1993, has assets below $50 million when they start, is active, and is not in certain "verboten" lines of work. In addition, qualifiers must buy or receive their stock directly from another investor. However, there are drawbacks people should be aware of. For example, a person can lose his or her eligibility if the company takes certain actions, such as buying back too many shares.


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