A tax carrot to attract investors

  • Comments
  • Print

It’s a little thing, but in this environment, little things add up. A tax break for investments in smaller companies was extended until Dec. 31 this year, a benefit that isn’t widely known.

Investors can avoid federal taxes on capital gains if the companies are C corporations and have less than $50 million in assets. Also, the stock must be held for more than five years.

In most cases, service businesses don’t qualify and the investor can’t be a corporation; however, the investor can be a limited partnership, which opens the door to many venture capital firms.

Ice Miller attorney Kristine Danz says a number of angel and institutional investors took advantage of the break last year, and she anticipates more this year. Tech and life sciences companies seemed to benefit most, she says.

Just FYI if you need that extra carrot to bring that investor aboard.

Please enable JavaScript to view this content.

Editor's note: IBJ is now using a new comment system. Your Disqus account will no longer work on the IBJ site. Instead, you can leave a comment on stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Past comments are not currently showing up on stories, but they will be added in the coming weeks. Please note our updated comment policy that will govern how comments are moderated.