A little-known provision in the tax code could result in big savings in capital gains taxes if you invest in entrepreneurial ventures. Under the provision (Section 1045), you're allowed to roll gains from one small-business investment into another and put off paying taxes owed from the initial investment, the money for which can be from any source. With this type of tax deferral, if you roll over all your gain, you may get 100 cents on the dollar when you reinvest. To qualify for the deferral, the investments must be considered Qualified Small Business Stock (QSBS), meaning the stock has to satisfy all the requirements stipulated in Section 1202 of the law.
SOURCE: Entrepreneur magazine