Qualified Small Business Stock (QSBS) entitles owners to exclude 50% to 100% of the gain realized on certain sales. In order to qualify as Qualified Small Business Stock, the stock needs to be issued by a domestic C corporation that does not have more than $50 million of gross assets as of the date the stock was issued and immediately thereafter. The QSBS must be stock acquired at its original issue (not from a secondary market) and must be held more than 5 years by the original owner.

Qualified Small Business Stock: What Qualifies?

QSBS must be issued by a corporation that uses at least 80% of its assets (by value) in an active trade or business (with some exceptionsi). A qualified small business cannot be an investment vehicle or an inactive business.

Non-corporate investors who own QSBS issued after August 10, 1993, and have owned the QSBS for more than five years may exclude all or a portion of the gain they realize on the disposition of the QSBS. The QSBS gain exclusion was enacted to spur investment in certain small businesses by granting a tax incentive for investors when they eventually sell their QSBS… » READ MORE