Can the stock of a firm providing professional service to the public qualify for the QSB (qualified small business) credit?

Forum|Forum|3 years ago
March 22, 2023
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TurboTax seems to exclude ALL prof'l service firms. But the sba.gov seems to differentiate instead between public vs personal services, excluding the latter.

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Best answer by ThomasM125

If you decide to treat your stock as small business stock but are not sure if that is allowed, you could file Form 8275 Disclosure Statement explaining your position. Making such a disclosure could reduce or eliminate future penalties associated with adopting a position that is later denied by the IRS. You can read more here: Form 8275 instructions

ThomasM125

The SBA defines personal service companies as follows:

So, in determining if the business gets small business stock treatment, you would have to look more to the nature of the services provided as opposed to who the services are being provided to. You can learn more here: Small business stock - SBA

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polkeddurgaAuthor

Thank you, ThomasM12.

Yes, that's the bullet point on sba.gov that I was looking at, and it addresses only "the nature of the services provided," as you say.

It just seems odd that it makes no mention of "professional service" at all, whereas TurboTax says "the stock of certain kinds of companies can't qualify at all, including financial, farming, professional service and health-related firms."

In trying to reconcile the two, I was mentally inserting a colon after the excluded "personal services" in the sba.gov point, and inferring "public" as its opposite.

So, although the stock I'm concerned about is not in banking, insurance, hotels, or the other excluded businesses, it is a small professional service corporation, and I'm not sure what to do. There doesn't seem to be very firm guidance on this.

But your reply does help clarify.