For the past twenty years, the US federal tax code has included provisions that allow startup investors to get favorable tax treatment on the capital gains they earn on early stage investments. These provisions are in Sections 1202 and Sections 1045 of the tax code.

I have been in the startup investing business for the entire time that these provisions have been in the tax code and to my knowledge, I have never taken advantage of them. So that tells you something, eiter about me or the provisions, or both.

However, given the increasing amount of angel investment activity in the startup sector, I thought it might be useful to post about these provisions, solicit comments and discussion about them, and maybe we all can learn something.

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