The rules are too complex to cover here. However, in summary, the unrealized gain on the qualified small business stock, at the time of the tax-free exchange, is frozen. A subsequent sale of the newly acquired stock can be characterized, in part, as a sale of qualified small business stock, eligible for the Section 1045 rollover. However, the amount of stock that qualifies, and the amount of gain deferred is limited to the amounts that exist at the time of the tax-free exchange. Stock options .
Qualified stock includes stock acquired on the exercise of an option.
However, it is not until the option is exercised that the stock is considered to be acquired. It is not tax advice. Readers must consult with professional tax advisors before attempting to apply this information to specific situations. In addition, the information on this page was current as of the date shown immediately under the title. The law may have changed after this date.