As we said in Tuesday's article, not every corporation entitles stockholders to the 100% exclusion on gains – the stock must be “qualified,” and meet the following regulations:
· The business is a domestic C corporation (not an S corporation and not a foreign C corporation).
· The corporation's total gross assets are $50 million or less at all times after Aug. 9, 1993, and before the stock was issued, as well as immediately after the stock was issued. (This is what makes the corporation "small”).
· The stock must be acquired at its original issue in exchange for money, other property, or as pay for services to the corporation. Investors can't buy the stock from another shareholder.
· At least 80% of the value of the corporation's assets must be used in the active conduct of the business (research is considered active conduct of a business).
· The business cannot be engaged in any of the following activities: services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services or brokerage services; consulting; banking, insurance, financing, leasing, investing or similar business; farming; mining; or operating a hotel, motel, restaurant or similar business.
