Do You Want 0% Capital Gains Tax on Your New Business Venture?

If you invest in a C Corporation that has less than $50M of assets in exchange for an issuance of stock and hold the stock for 5 years before selling it, then you pay no federal tax on up to the first $10M of gains you have. The business cannot be one involving personal services (such as finance, investing, farming, or operating a hotel or restaurant.) Obviously, the ability to use this rule is limited, but we find that it works well for a business involving a new invention or new technology: If you get a patent on a new product, don’t get the patent in your name, but instead form a C Corporation, have the C Corporation obtain the patent and engage in business, and then when the patent gets valuable, sell the stock of the C Corporation. By following these steps, your gain might be tax free.