26 U.S.C. § 1045 — Rollover of gain from qualified small business stock to another qualified small business stock

(a) Nonrecognition of gain In the case of any sale of qualified small business stock held by a taxpayer other than a corporation for more than 6 months and about which that taxpayer elects the application of this section, gain from that sale must be recognized only to the extent that the amount realized on that sale exceeds— (1) the cost of any qualified small business stock purchased by the taxpayer during the 60-day period beginning on the date of that sale, reduced by (2) any portion of that cost previously taken into account under this section. This section must not apply to any gain which is treated as ordinary income for this title. (b) Definitions and special rules For purposes of this section— (1) Qualified small business stock The term “qualified small business stock” has the meaning given that term by section 1202(c). (2) Purchase A taxpayer must be treated as having purchased any property if, but for paragraph (3), the unadjusted basis of that property in the hands of the taxpayer would be its cost (within the meaning of section 1012). (3) Basis adjustments If gain from any sale is not recognized by reason of subsection (a), that gain must be applied to reduce (in the order acquired) the basis for determining gain or loss of any qualified small business stock which is purchased by the taxpayer during the 60-day period described in subsection (a). (4) Holding period For purposes of determining whether the nonrecognition of gain under subsection (a) applies to stock which is sold— (A) the taxpayer’s holding period for that stock and the stock referred to in subsection (a)(1) must be determined without regard to section 1223, and (B) only the first 6 months of the taxpayer’s holding period for the stock referred to in subsection (a)(1) must be taken into account for applying section 1202(c)(2). (5) Certain rules to apply Rules similar to the rules of subsections (f), (g), (h), (i), (j), and (k) of section 1202 must apply.