By purchasing stock in certain small businesses, you can not only diversify your portfolio but also enjoy preferential tax treatment. And under a provision of the tax extenders act signed into law this past December (the PATH Act), such stock is now even more attractive from a tax perspective.100% exclusion from gainThe PATH Act makes permanent the exclusion of 100% of the gain on the sale or exchange of qualified small business (QSB) stock acquired and held for more than five years. The 100% exclusion is available for QSB stock acquired after September 27, 2010. (Smaller exclusions are available for QSB stock acquired earlier.)The act also permanently extends the rule that eliminates QSB stock gain as a preference item for alternative minimum tax (AMT) purposes.What stock qualifies?A QSB is generally a domestic C corporation that has gross assets of no more than $50 million at any time (including when the stock is issued) and uses at least 80% of its assets in an active trade or business.Many factors to considerOf course tax consequences are only one of the many factors that should be considered before making an investment. Also, keep in mind that the tax benefits discussed here are subject to additional requirements and limits. Consult us for more details.