What is a Section 1045 rollover?
Section 1045 lets you defer the gain on qualified small business stock (QSBS) you’ve held for more than six months by reinvesting the proceeds in other QSBS within 60 days of the sale. The deferred gain carries into the new shares, and so does your holding period.
How it works
You sell QSBS, receive cash, and within 60 days buy newly issued stock in one or more qualifying small businesses. You elect the rollover on your tax return for the year of the sale. Your basis in the new stock is reduced by the gain you deferred.
Who can use it
Individuals, trusts, and pass-through entities such as partnerships and S corporations. C corporations can’t.
Why it matters
QSBS gain can be excluded from federal tax under Section 1202, but generally only after a holding period (five years for stock issued on or before July 4, 2025). Acquisitions and tenders often happen sooner. A rollover keeps the gain deferred and lets the holding period keep running inside the new companies.
The limits
- Only the amount you reinvest is deferred. The shortfall is taxed now.
- Replacement stock must be bought directly from the company, not on a secondary.
- The new company has to meet the active business requirement for at least your first six months as a holder.
General information, not tax advice. Last reviewed November 2026.