How to report a qualified small business exclusion post-sale distribution

[Stresch]

I do not know how to account for a capital gain exclusion and need some help. In 2019, a start-up medical device company was purchased by a larger company. I was an investor in the smaller company and made four stock purchases over time, so I received a payout that qualified as a small business stock gain exclusion for two of the purchases because of the length of time I owned the stock. With TurboTax’s help, I was able to take care of my filing.

An additional part of the deal included post-sale extra payouts if the acquiring company met certain sales thresholds for the first year, which they did. This year, I cannot find a way to report my distribution in TurboTax, as it is not a sale. My friends have said that it is not taxable. I manually completed Form 8949, but will that be forwarded when I efile? Can you help me? 

[tagteam · Accepted solution]

Please refer to the information below.

See https://www.irs.gov/instructions/i1040sd#en_US_2021_publink1000285561

[Stresch]

Thank you for your response.  It appears the information you propose refers to the profit made from the sale of the stock.  I reported that information last year.  This year's profit was from a distribution from the acquiring company meeting a specific sales goal after the acquisition.  In other words, my profit this time is from a type of dividend-like bonus.  I appreciate your attention.

[Stresch]

I am struggling with words to report my situation, and I will try again. I have read that the government, at times, has tried to stimulate investment in small business start-up companies. They do this by (1) exempting tax payments on stock sales for qualified small businesses and (2) exempting tax payments for bonus payouts on meeting sales thresholds of their product. In 2019, a larger company bought the small company I invested in, for which I received a profit. Eighty percent of my stock qualified for QSBE; the remaining 20% did not qualify because of the purchase dates. I reported this in my Turbotax efiling for 2020. Now, a year later, the acquiring company has met a sales threshold, for which I have received a payment. How do I report the exemption from meeting a sales threshold in Turbotax?