Section 1202/1045 and Tax Evasion?

Is it considered tax evasion if:

In 2017, John purchases QSBS stock for $1,000 from an early stage start up. In 2019, the startup is sold to a public company and John receives $1,000,000 in cash proceeds. Within 60 days (Section 1045 rollover), John purchases $1,000,000 of QSBS stock in a C Corporation he started and is the Executive Chairman, President, etc of. The C Corporation does not have any paid employees and John uses a minimal amount of its funds to pay personal expenses.  Now, in 2024, John continues to hold the $1,000,000 in his C Corporation and it has not been spent down by the C Corp.

 

John claims that over the course of his holding (it’s now been 7 years) inclusive of electing the Section 1045 rollover into his own C Corporation that he’s fulfilling Section 1202 requirements. Except that it can be proven that John has just parked his money and used the C Corp as a tax shelter through the Corp’s bank account statements and financial statements.

 

If the C Corp’s info is presented to the IRS, has John illegally deferred and failed to pay capital gains taxes on his $999,000 gain?  

 

Or can it only be proven that he has failed to pay capital gains taxes after he sells his “QSB” stock from his C Corp?  

 

If after he sells, does the active business reqmt have to apply for the first five years? Or for the entire 7+ years?