Small Business Tax Amendments of 1985

Small Business Tax Amendments of 1985 - Amends the Internal Revenue Code to repeal the requirement that contemporaneous records be kept to substantiate deductions with respect to: (1) business travel expenses, including automobile expenses; (2) business entertainment expenses; and (3) expenses for gifts.

Increases the holding period required for long term capital gains treatment from six months to one year.

Allows a deduction of 80 percent of the net capital gains from small business investments which are held for at least three years. Increases the maximum dollar limitation with respect to the election of a taxpayer to expense certain depreciable business assets.

Provides for the nonrecognition of gain on the sale of property where, within one year from the date of sale, the taxpayer purchases a qualified small business investment (equity stock in a domestic qualified small business corporation). Provides that if the purchase of any qualified small business investment results in nonrecognition of gain, the basis of such investment shall be reduced by the amount of gain not recognized on the sale of such property. Modifies the statute of limitations with respect to the assessment of any deficiency attributable to the sale of property involved in the nonrecognition provision.

Provides that the Regulatory Flexibility Act applies to the Internal Revenue Service.