QSBS (Section 1202): Qualifying and the Holding-Period Check
How a Qualified Small Business Stock (QSBS) can exclude gains from federal tax, and what it takes to qualify.
Qualified Small Business Stock (QSBS) under Section 1202 can let eligible shareholders exclude a significant portion of federal capital-gains tax when they sell (if certain requirements are met). This is one of the most valuable tax benefits available to startup founders and early investors.
Common Requirements:
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The stock is in a domestic C-Corporation
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It was acquired at original issuance (not on the secondary market)
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The company's gross assets were under the statutory threshold when the stock was issues
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You hold the stock for the required period before selling
QSBS rules are technical and fact-specific. Confirm eligibility with a tax advisor before relying on it.
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