What is a QSBS rollover?
QSBS rollover refers to the tax-deferral strategy under Internal Revenue Code Section 1045, which allows investors who sell Qualified Small Business Stock (QSBS) held for more than six months to defer capital gains recognition by purchasing replacement QSBS within 60 days. The deferred gain reduces the basis in replacement stock, preserving tax liability for future recognition. Only the gain amount requires reinvestment, not the entire sale proceeds. Replacement stock must be purchased directly from a qualifying C Corporation meeting all Section 1202 requirements. The replacement stock's holding period includes the original stock's holding period, allowing cumulative time to count toward the five-year requirement for qualifying for the Section 1202 exclusion.
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