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Title 26 — Internal Revenue CodeRelease 119-73

§1045 Rollover of Gain From Qualified Small Business Stock to Another Qualified Small Business Stock

Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter O— Gain or Loss on Disposition of Property › Part III— COMMON NONTAXABLE EXCHANGES › § 1045

Last updated Apr 6, 2026|Official source

Summary

If you sell qualified small business stock you have held for more than 6 months, you can put off paying tax on the gain by buying other qualified small business stock within 60 days of the sale. You must elect this treatment, and it is not available to corporations. You are taxed only on the part of your sale proceeds that you do not reinvest in the new stock. The deferred gain is not forgiven — it reduces your basis in the new stock, so it is taxed later when you sell that stock. Qualified small business stock has the same meaning as under the rules for the small business stock exclusion.

Full Legal Text

Title 26, §1045

Internal Revenue Code — Source: USLM XML via OLRC

(a)In the case of any sale of qualified small business stock held by a taxpayer other than a corporation for more than 6 months and with respect to which such taxpayer elects the application of this section, gain from such sale shall be recognized only to the extent that the amount realized on such sale exceeds—
(1)the cost of any qualified small business stock purchased by the taxpayer during the 60-day period beginning on the date of such sale, reduced by
(2)any portion of such cost previously taken into account under this section.
(b)For purposes of this section—
(1)The term “qualified small business stock” has the meaning given such term by section 1202(c).
(2)A taxpayer shall be treated as having purchased any property if, but for paragraph (3), the unadjusted basis of such property in the hands of the taxpayer would be its cost (within the meaning of section 1012).
(3)If gain from any sale is not recognized by reason of subsection (a), such gain shall be applied to reduce (in the order acquired) the basis for determining gain or loss of any qualified small business stock which is purchased by the taxpayer during the 60-day period described in subsection (a).
(4)For purposes of determining whether the nonrecognition of gain under subsection (a) applies to stock which is sold—
(A)the taxpayer’s holding period for such stock and the stock referred to in subsection (a)(1) shall be determined without regard to section 1223, and
(B)only the first 6 months of the taxpayer’s holding period for the stock referred to in subsection (a)(1) shall be taken into account for purposes of applying section 1202(c)(2).
(5)Rules similar to the rules of subsections (f), (g), (h), (i), (j), and (k) of section 1202 shall apply.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

1998—Subsec. (a). Pub. L. 105–206, § 6005(f)(1), in introductory provisions, substituted “a taxpayer other than a corporation” for “an individual” and “such taxpayer” for “such individual”. Subsec. (b)(5). Pub. L. 105–206, § 6005(f)(2), added par. (5).

Statutory Notes and Related Subsidiaries

Effective Date

of 1998 AmendmentAmendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date

Section applicable to sales after Aug. 5, 1997, see section 313(c) of Pub. L. 105–34, set out as an

Effective Date

of 1997 Amendment note under section 1016 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 1045

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73