California Defends Denial of Stock Tax Break to Business Founder

An engineering design firm co-founder’s $5 million gain from his sale of stock in the company doesn’t qualify for special California income tax treatment, a state tax agency told an appeals court.

Charles Harper claimed a 50% exclusion on his 2009 state returns for $10 million in proceeds he realized from selling stock in Sierra Monolithics Inc., which he co-founded in the 1980s. He’s asking the California Court of Appeal, Second Appellate District, for a refund of the Franchise Tax Board’s assessment of an additional $547,000, after he paid the tax under protest.

California’s “qualified small business stock” exclusion applies ...