@rjs
Hello,
I wanted to run by you the way I'm planning to enter sales for founders stock of a small start up. From reading online, in order to qualify as "Qualified Small Business Stock (QSBS)", the new company's inception date should be after 27-SEP-2010 (check), the stocks/shares should be awarded before the company has raised its first $50MM (check), the stocks/shares should be held for >5years (check), and this exclusion will only apply for the first $10MM gain of stock sales (per individual filing as single or for a married per couple).
So, all of these requirements check out in my case. Now comes the question on the “mechanics” of entering it into TurboTax. I’m using TurboTax Deluxe 2023, downloaded application. NO sale happened in 2023. A sale is planned this year as a fund is willing to purchase some of my stock.
So, I’m only running a dry run of this and for now I’m pretending using TurboTax Deluxe 2023 that it has happened in 2023 (a dry run). I think I’ve got it done right, from what I can tell as TurboTax has screens that come up that are re-assuring and that show that TurboTax handles this well.
One thing I don’t know is whether I’ll be getting in early 2024 a 1099-B, 3922, 3921 for the sale, or whether I’ll be getting any form at all! Either way, I’ll need to enter the sale. So, I plan to proceed as follows (kindly provide feedback if you see anything awry in the way I’m navigating it in TurboTax):
(1). Investment Income >>Stocks, Cryptocurrency … >>Add more sales >> Stocks, Bonds, Mutual Funds (left block option) >>Skip this import
(2). I enter a bank name >>Indicate Yes for “Does these sales include any employee stock?” >>Indicate “No (1–3)” for Do you have more than three sales on your 1099-B (again I’m assuming there’ll be a 1099-B). Then “Enter one by one” and then “Continue” to get to primary screen where entry happens.
(3). In the pull-down menu options I indicate: (i) "Long-term basis not reported to IRS" (or "Long-term basis reported to IRS", not sure which one it's going to be), (ii) Stock (non-employee), (iii) I purchased it, (iv) X shares of Company Y, (iv) MM/DD/YYYY for “The date this investment was acquired” (I enter the date stock/shares were awarded when newco was created >5 years ago) >> MM/DD/2023 for “Box 1c- Date sold or deposed” (for this dry run, I'm entering a dummy date in 2023 to get to see what happens), Box 1d: $1,000,000, Box 1e: $0, and then Continue. This CRANKS UP the taxes, both federal and state.
(4). Selected “This was a small business stock”, >>“I don’t want to make any changes to my cost basis right now”, >>"Qualifies small business stock eligible of gain (section 1202)". The taxes plunge down all the way back to where they were before the stock sale entry (beautiful).
(5) >>$1,000,000 (as now being the amount used up from the overall 10MM allowed – this is cumulative for this sale plus others before it until the 10MM threshold is reached, but this is the 1st sale in my case). If only a portion is left to be used (say only 750,000 is entered here, then TurboTax adjust the taxes up based on the 250,000 that is not excluded – all works sensibly).
The questions are:
I. Do you see this navigated properly?
II. Do you see it ok to proceed as described above even if ultimately there is no 1099-B or any other form issued (I'm not sure that could be the case, but just asking as I'm not sure the buying fund or who would be responsible to issue it in early 2024 for a sale this year, but note that in (3) above, there are responses associated with Boxes 1c, 1d, and 1e) – is it ok to fill them as would appear fitting even if there's tehnically no form to attach?
Thank you.
