Do you have to reinvest all of your proceeds in a Section 1045 rollover?
No. You can reinvest any amount, across as many qualifying purchases and companies as you like, within 60 days of the sale. But proceeds you don’t reinvest are taxed as gain first, so deferring all of your gain means reinvesting an amount equal to your full proceeds, not just the gain.
The rule
Section 1045 says gain is recognized only to the extent the amount you realized on the sale exceeds the cost of qualified small business stock you buy during the 60 days starting on the sale date. In plain terms: every dollar of proceeds you don’t reinvest is taxable, up to the full amount of your gain.
A worked example
You sell QSBS for $10M. Your basis is $1M, so your gain is $9M.
- Reinvest $10M: $0 taxed now. All $9M deferred.
- Reinvest $9M (just the gain): $1M taxed now. $8M deferred.
- Reinvest $5M: $5M taxed now. $4M deferred.
- Reinvest $1M: $9M taxed now. Nothing deferred.
The first dollars you reinvest effectively cover your basis, so they defer nothing. For early employees and founders with a very low basis, this barely matters: nearly every dollar reinvested defers a dollar of gain.
The common mistake: reinvesting only the gain
Many sellers assume they need to reinvest the gain. To defer all of it, you need to reinvest the full proceeds. In the example above, reinvesting $9M instead of $10M leaves $1M taxable.
Multiple purchases are fine
Nothing requires a single purchase. Ten $1M checks into ten qualifying companies counts the same as one $10M check, as long as each purchase lands inside the 60 days. The deferred gain reduces your basis in the replacement stock in the order you bought it.
What about splitting the sale?
Each sale starts its own 60-day window, which can help you stagger deadlines. You can’t count the same purchase against two sales. Splitting doesn’t create extra tax savings either: it mainly shifts how much gain is taxed now versus carried into the new stock. For example, two $5M sales with $5M reinvested against the first one leaves $4.5M taxed now and a $0.5M basis in the new stock. One $10M sale with the same $5M reinvested leaves $5M taxed now and a $1M basis. The difference shows up later, when you sell the new shares.
Your basis in the new stock
Your basis in the replacement stock equals what you paid, minus the gain you deferred. In the full-rollover example, $10M paid minus $9M deferred leaves a $1M basis, the same as your original basis.
General information, not tax advice. Last reviewed November 2026.