A coordinating regulation adopted by the SEC lets these securities offerings proceed without any federal filing. Investors who acquire shares of stock that are considered restricted securities will not be able to sell their shares until the expiration of a minimum one-year holding period. Also, an investor seeking to sell shares of stock subject to Rule 144 must comply with certain volume sale limitations under the rule, and the sale cannot be consummated unless the issuer is in compliance with Rule 144's publicly available information requirements. Under Section 1045 of the Internal Revenue Code, investors who sell stock that qualifies as small business stock under Section 1202 may roll over their gains into new qualifying stock on a tax-free basis. Investors can continuously defer taxation on qualifying small business stock capital gains by rolling over gains from one small business investment into another qualifying investment.
Investors can continue to roll over such successive gains for an unlimited period.
Recognizing that start-up stage investing is more risky than later stage investments, Congress also has provided a limited tax break for very early stage investors in companies which fail. Prospective Angel investors should consult their qualified tax advisers and legal counsel for an in-depth explanation of how these tax provisions may affect them individually.