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Stock qualifying under Section 1202 of the Internal Revenue Code of 1986, as amended (the “Code”), as Qualified Small Business Stock (“QSBS”) allows eligible non-corporate taxpayers to potentially exclude a portion or all of the gain from selling the stock held for a minimum period of time (as explained below), with a 100 percent exclusion available, subject to certain caps, for stock acquired after September 27, 2010. The federal tax legislation enacted on July 4, 2025, (the One Big Beautiful Bill Act or “OBBBA”) also expands the benefits of QSBS as explained below. The exclusion of capital gain on sale is designed to encourage investment in small business. The exclusion can benefit startup founders, early investors, angel investors, and employees who receive stock in a qualifying company. Section 1202 of the Code has many rules and exceptions, and continued compliance with the rules is essential to preserving QSBS status of the stock, including dispositions of the stock at death and tax-free reorganizations.

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Key Requirements for Qualifying as QSBS

Domestic C Corporation. The business must be incorporated as a U.S. C corporation.

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Gross Asset Limitation. The corporation’s aggregate gross assets must not have exceeded $50 million at any point from August 10, 1993, until immediately after the stock issuance. This threshold has been increased to $75 million under the OBBBA effective after July 4, 2025, with inflation adjustments starting in 2027.

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To read the full post, please visit our&nbsp;<a href="https://futurewealthnavigator.com/2025/08/20/qualified-small-business-stock-in-tax-and-estate-planning/">Future Wealth Navigator</a>&nbsp;blog.

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This post was reprinted in Thomson Reuters’&nbsp;<a href="https://www.thomsonreuters.ca/en/taxnet-pro.html">Taxnet Pro</a>&nbsp;on August 20, 2025:&nbsp;<a href="https://www.blankrome.com/sites/default/files/2025-08/Thomson%20Reuters%20Taxnet%20Pro-Qualified%20Small%20Business%20Stock%20in%20Tax%20and%20Estate%20Planning%20082025.pdf">Qualified Small Business Stock in Tax and Estate Planning</a>.

Qualified Small Business Stock in Tax and Estate Planning

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Qualified Small Business Stock in Tax and Estate Planning

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