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<<First, is there an IRS rule that allows one to defer capital gains on the sale of a business if another
business is acquired within 60 days ? and what is the rule (IRS Code Section) ?

Second, is that applicable to the above transaction ?>>

KAT provided you with the bad news. Regarding the "rollover" provisions of the new law, the sale must occur after August 5, 1997. So this will not be able to help you. But for future reference, check out IRS code sections 1045 and 1223 (as amended by the 1997 tax act).

But as KAT also pointed out, if the business is a qualified small business stock, 50% of the capital gain may be excluded. Check out IRS Section 1202 for additional details. Additionally, IRS Pub 550 with provide you with some additional information on this issue.

Finally, and again for future reference, be aware that various taxpayers may be able to defer recognition of capital gain realized on the sale of publicly traded securities if the taxpayers use the sales proceeds within 60 days to purchase common stock or a partnership interest in a specialized small business investment company. Again, check out IRS Pub 550 for an additional discussion on this issue.

TMF Taxes
Roy
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