Enter Section 1202 QSBS Exemption for C-Corp Stock Sale in TurboTax Business Desktop

[ajgalante]

I sold a private equity position in a c-corp that qualifies for QSBS capital gains exemption, but there is no place to enter the exemption in TurboTax Desktop software (step by step). I had to enter an override on exemption amount directly on Form 8949, but now the TurboTax software will not let me file or get past the error check section in the step-by-step wizard.

I have looked in the community articles and see several references to historical versions of the TurboTax desktop software that do not hold true in the current version. I also saw a few references to workarounds in the "property disposition" section of the step-by-step wizard, but again, these do not seem to work. 

How to I properly enter a private sale of c-corp stock and its associated QSBS capital gain exemption?

[ThomasM125]

After you enter the sales proceeds and cost basis from your Form 1099-B, you will see a screen that says Let us know if any of these situations apply to this sale. You need to check the option that says this is small business stock. On another screen you will see What Kind of Small Business Stock did you Sell? There are a couple of options you can choose on that screen to exempt the gain from taxation in the current year.

[ajgalante]

There is no 1099-B. This was a private equity transaction.

So, there is no step where I can select "Let us know if any of these situations apply to this sale". There is no step that allows me to check the option that says "this is small business stock".

[ThomasM125]

I am using TurboTax Home and Business and did not have any trouble with the following, it may help if you clarify what version of TurboTax you are using.

You can choose the "Other" option for type of investment sale and choose stock (non-employee) on the screen where you enter the sales proceeds and you will see the same option to indicate that it was small business stock.

You enter stock sales in the Wages and Income section of TurboTax, then Investments Sales, then Stocks, cryptocurrency, Mutual Funds, Bonds, etc... Choose "Other" as the type of investment sale. You'll come to a screen where you can enter in your sales proceeds and cost basis. Choose Stock-non employee for the type of investment sold.

The next screen will say Let us know if any of these apply to this sale. Choose the small business stock option and on the next screen you can indicate that it is not taxable.

[ajgalante]

I am using TurboTax Business Desktop. The options you are describing do not exist. 

[RobertB4444]

You're going to need to pretend that you received a 1099-B.  You're going to create a substitute version of that since the information that you need to enter would all be contained on a 1099-B if one had been issued to you.  So go to the section for the 1099-B and enter the information there as though you had received that form.  

Once you have entered the information about your sale of small business stock in that section the options that you have been searching for will show up at that point and you'll be able to follow all of the steps that have been entered above.

[ajgalante]

I am pretty sure you are referring to the online version and not TT desktop. The process you outline does not yield any options to select small business stock or any other alternative treatment for that matter. Please see attached screenshots in sequence. If I am missing something, please point it out. 

[DaveF1006]

TurboTax Business cannot directly enter a QSBS (Section 1202) gain exclusion because QSBS is claimed on an individual return. So even if the stock you sold was C‑corp stock, the gain exclusion is taken on your personal 1040, not on the corporation’s return. Here is how to report it on the individual return.

You’ll enter the sale as if it were a regular capital asset sale:

1. Go to Investment Income → Stocks, Mutual Funds, Bonds, Other
2. Choose “I’ll enter it myself.”
3. Enter:

• Description of stock
• Date acquired
• Date sold
• Sales proceeds
• Cost basis
• Indicate that no 1099‑B was received (common for private sales)

This creates the transaction on Form 8949.