I had three lots (i.e., purchased on three different dates) of QSB Stock held for more than five years that I sold (actually, received cash in a taxable merger) in 2021. I received a payment in 2021 that was less than my cost basis in two of the lots, and more than my cost basis in one of the lots, and the gain on the one lot is more than the losses on the other two, so I am net positive in the year of sale if gains and losses are considered together. There will be contingent payments based on achievement of various milestones in future years, and it is likely that the gains on all of these lots will be substantial over the remaining years, but the amount can't be known at this point.
I received a 1099-B from a financial institution that was engaged by the acquiror, but the 1099-B provides no information other than gross proceeds paid in 2021 and date of sale in 2021. Given that this is an installment sale, I can't use the Personal Income / Investment Income (i.e., for 1099-Bs), so I assume I have to use the general installment sale method you described in your answer.
Using that method, should I treat each lot separately, and will I be able to make entries for the 1202 capital gain exclusion for QSB Stock? If not, how do I handle that in TurboTax? Secondly, when I received additional payments in 2022 and beyond, do I still get to apply the 1202 capital gain exclusion based on the sale in 2021? If I have shown losses for two lots in 2021 that turn into gains as of 2022 or later, how do I report that? It almost seems to me that in those cases, what I received in 2021 was more like partial return of capital, but I'm just guessing at this point.
If you need any more detail, I would be happy to provide it.
If you could give me any insights on these issues, I would be most grateful.
Thank you,
Steve A.
