A Qualified Small Business Stock (QSBS) rollover—also known as a Section 1045 rollover, is a powerful tax strategy that allows investors to sell QSBS shares and reinvest the proceeds into new qualifying stock within 60 days, deferring capital gains taxes. For Massachusetts entrepreneurs, executives, and investors who hold equity in small, fast-growing companies, this strategy can create significant tax advantages.
But when a divorce is involved, QSBS rollovers add an extra layer of complexity that can affect how assets are valued, divided, and taxed.
How QSBS Rollovers Affect Property Division in Massachusetts Divorce
For the spouse holding QSBS, a rollover can be a valuable financial planning tool, but one that complicates marital asset valuation. QSBS can often times be a very valuable asset, but when dividing an asset like this in the divorce it is important to remember that any gains on that asset will likely be taxed as capital gains and can be significant. QSBO does carry with it certain tax advantages though, which if you and your spouse are careful and work strategically on can potentially eliminate future capital gains taxes by taking advantage of the QSBO rollover exclusion, which allows both spouse to take advantage of the 1202 exclusion.
The timing of a rollover, whether it happens before, during, or after the divorce, can also influence how courts or negotiators handle property division, alimony, and future tax obligations.
For the non-holding spouse, a QSBS rollover may delay the realization of capital gains that could otherwise be shared as marital property. There may, however, be advantages which allow parties to retain a valuable business interest, while taking advantage of fvorable tax treatment.
Key Considerations for Divorcing Spouses
If QSBS or similar investment interests are part of your marital estate, it’s crucial to account for both the timing and tax implications. Consider the following steps:
- Obtain a professional valuation of all QSBS holdings, factoring in deferred capital gains and potential tax exclusions.
- Account for future tax obligations when negotiating property division, support, or alimony.
- Negotiate disclosure and reporting requirements to ensure both spouses are informed about future QSBS transactions or rollovers.
- Consult qualified professionals, including a Massachusetts divorce attorney and tax advisor, to navigate both IRS rules and state-specific family law implications.
Why Expertise Matters in High-Net-Worth Divorces
A QSBS rollover isn’t just a financial event, it’s a tax strategy that intersects with property law, business valuation, and long-term planning. At Mansur Law Group, we help high-net-worth individuals, business owners, executives, and investors understand how complex financial assets impact their Massachusetts divorce settlements and we regularly work with experts to ensure your financial future is protected.
Our team brings the legal and financial insight needed to protect your interests during every stage of the process.
Contact Mansur Law Group today at (978) 341-5040 to schedule a confidential consultation about your divorce and learn how QSBS rollovers may affect your financial future.