QSBS Tax-Deferred Rollover

Today, many business owners are aware of qualified small business stock ("QSBS") and the exclusion from gain on certain sales of QSBS under §¹ 1202, but it is still common to encounter business owners who are either unaware of QSBS or who hold QSBS and have an opportunity to sell their company prior to satisfying the five-year holding requirement necessary to claim the exclusion. In either case, planning opportunities exist to obtain the benefits of QSBS.

Background

Recall, that § 1202 permits a taxpayer who sells QSBS to exclude from income the greater of $10 million or 10 times the aggregate adjusted bases of QSBS issued by such corporation and disposed of by the taxpayer during the taxable year.² However, to claim that exclusion, the taxpayer must have held the QSBS for at least five years prior to the sale.³ Now, imagine a scenario where the taxpayer has held the QSBS for four years and obtains a significant offer to acquire his shares. Many taxpayers might