The New Jersey Gross Income tax is difficult in that it does not adopt federal taxable income as its starting point. Rather, gross income is defined by New Jersey statute NJSA 54A:5-1. Certain aspects of federal law are incorporated in NJ law, but it is by specific reference to a federal provision, not an all encompassing general tie in. Since NJ defines its taxable gross income independently of the federal code, federal exemptions such as Qualified Small business stock in section 1202, would have to be specifically adopted by NJ statute in order to apply in figuring NJ tax. There is presently before the NJ assembly a bill to adopt rules similar to IRC section 1202, but it has not yet been passed into law. Which would lead one to the conclusion that presently gain on sale of qualified small business stock is fully taxable in New Jersey. This is why I was confused when Turbo Tax did not transfer the full gain from the federal return to the NJ return.