QSBS – The More You Know
Tax code is rarely interesting. But, if you own equity in a typical startup, Chapter 26, Section 1202, of the US tax code is fascinating and could be very lucrative. The provision defines qualified small business stock (QSBS), and under specific circumstances, a sale of qualifying stock can mean a 100% exclusion from capital gains tax, subject to some limitations. No small thing—although surprisingly few people seem to know about it.
TechCrunch contributor Patrick Wallen says that he is “frequently startled” by the lack of awareness about this tax code provision. He’s highlighting QSBS in response to politics in motion that may change up the game. In his recent TechCrunch article, How Trump will impact venture capital: The future of QSBS, Wallen explains the history of QSBS (including its noble intentions to stir investment), who is typically eligible, and looks at the legislative horizon for this little-known provision.
If you want to join the few who are in the know (and you should), our friends at DLA Piper offer an informative overview of the requirements and enticing benefits of QSBS in their article, A short summary of qualified small business stock tax benefits and requirements.