Updated July 28, 2026. Quick answer: §1042(c)(3) defines the replacement period as “the period which begins 3 months before the date on which the sale of qualified securities occurs and which ends 12 months after the date of such sale.” That is fifteen months, and it means purchases made in the three months before closing can count — which almost every summary of this provision omits.
The conditions that gate the rollover
| Requirement | Provision |
|---|---|
| The plan owns at least 30% of each class, or of total value, immediately after the sale | §1042(b)(2) |
| You held the securities at least 3 years at the time of sale | §1042(b)(4) |
| Sale to an ESOP under §4975(e)(7) or an eligible worker-owned cooperative | §1042(b)(1) |
| A written consent statement filed by the corporation | §1042(b)(3) |
| The company has no readily tradable stock on an established market | §1042(c)(1) |
The three-year holding period is measured at the time of sale, so it is a planning constraint rather than a surprise — but it disqualifies recently issued or recently acquired shares, which catches founders who reorganised their holdings shortly before a transaction.
What you can actually roll into is narrow
Much narrower than most people assume — Treasuries and index funds do not qualify. That constraint deserves its own page because it is the one that most often surprises a seller after the sale has already closed.
Sources
IRC §453(a), (c), (d), (i); §453A(b), (c) and (d); Temp. Reg. §15a.453-1(c) and (d); §1060(a) and Treas. Reg. §1.1060-1(c) and (e); the asset classes at Treas. Reg. §1.338-6(b) as reproduced in the Instructions for Form 8594; §1042(a), (b), (c); §1202(a)(1) and (c)(1); §6621(a)(2). All read July 2026.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.