As many deal professionals are painfully aware, the federal capital gains tax rate (in most cases) rose from 15 percent in 2012 to 23.8 percent in 2013. In light of this tax rate increase, it is now more crucial than ever for deal professionals to creatively structure their investments in order to maximize their after-tax return. One method available to mitigate the effects of the capital gains tax rate increase is to qualify an investment under Section 1202 of the Internal Revenue Code. The article linked below, authored by Daniel N. Zucker and Jeffrey C. Wagner, describes the requirements and potential benefits of qualifying an investment under Section 1202.
For Private Equity Investors, Section 1202 May Be Worth Another Look
The American Taxpayer Relief Act of 2012 extended some of the more significant benefits of Internal Revenue Code Section 1202, which permits eligible noncorporate taxpayers to exclude from taxable income a specified percentage of any gain from the sale or exchange of qualified small business stock held for more than five years.
To read the full article, click here.