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" ... However, going one step further, Section 1202 of the Internal Revenue Code allows for the sale of qualified small business stock to avoid capital gain taxation all together. For example, an owner was paid a reasonable salary compensation for six years and then decides to sell his stock. Under the double taxation methodology, the owner would be assessed a capital gains tax on the sale of stock as well as paying ordinary income tax rate on the salary earned. However, that owner could potentially recognize zero capital gain on the sale of their stock by applying Section 1202 and essentially bring the effective tax rate of the C Corporation back down to 21%. While some might be shocked to hear of Section 1202, or qualified small business stock exclusions, the ability for small business to qualify for this exclusion is real and is becoming more relevant when the individual tax rate keeps going up and the C Corporate tax rate remains to be low. The history of Section 1202 dates back to 1993. However, before Tax Cut and Jobs Act (TCJA ), the C corporate tax rates were as high as 35% and individual tax rates were up to 39.6%, decreasing incentive for structing 1202 corporations. Then the TCJA passed, and the C Corporate tax rate plummeted to 21% while the pass-through effective tax rate with 199A benefits hovered around 30%. At that time, discussions increased with regards to exploring Section 1202, but there was a fear by pass-through entity owners that if they were to convert, the C Corporation tax rate would skyrocket. More information on Section 1202 corporations, including how and when they can be utilized will be discussed in next months article. ... "