Qualified Small Business Stock (QSBS)

Definition

Section 1202 allows non-corporate taxpayers to exclude up to 100 percent of gain (subject to a per-issuer cap) on QSBS held for more than five years. The corporation must be a domestic C corporation with gross assets under $50 million when stock is issued and meet active-business requirements.

Examples

• A founder of a venture-backed startup selling QSBS after 5+ years may exclude up to $10M (or 10x basis) of gain.