THE WHITE HOUSE
Office of the Vice President
Fact Sheet on Expansion of Small Business Capital Gains and Home Office Deduction
Today, Vice President Gore announced that the Clinton administration would support expansion of the small business capital gains tax incentive and of the home office deduction. These two tax benefits will help hi-tech and bio-tech entrepreneurs, start-up companies, parents who work out of their home, and other Americans who are seizing the opportunities of the new economy.
Expands the Small Business Capital Gains
Allows more business to qualify for capital gains by doubling the limits on asset size from $50 million to $100 million.
Makes it easier for businesses to qualify for the capital gains tax
(1) Working capital will be treated as an active trade or business asset if it is reasonably expected to be used within five years. (2) Funds invested in R&D will be treated as creating an active trade or business asset dollar-for-dollar.
(3) The time period for taking full advantage of these working capital rules would be extended from 2 years to 5 years. These changes would particularly help bio-tech companies and other R & D firms that have long development periods before products can be brought to market.
Permit stock redemptions for a broader range of incidents, e.g. death, divorce, mental incompetence.
Clarify rules to ensure that software and other R&D firms are not disqualified simply because their principal asset may be the skill or reputation of their employees.
Expands Home Office Deduction
Expands the existing home office deduction to cover cases where:
(1) The office is exclusively used to conduct substantial and
essential administrative or management activities on a regular
(2) The taxpayer has no other location to conduct these essential administrative or management activities.
This proposal would not amend the definition of a principal place of business.