QSBS Trust Stacking Comes Under The Microscope

First enacted in 1993, Qualified Small Business Stock (QSBS) has been one of the most powerful wealth-building tools for founders, early employees, and venture investors. Section 1202 of the Internal Revenue Code allows up to $15 million in capital gains to be shielded from federal taxes on the sale of qualifying stock, provided the stock is held long enough and the company meets the statutory requirements. That benefit became even more valuable after Congress expanded the exclusion in 2025.

But as often happens in tax planning, where there is opportunity, there is also innovation, and that invites scrutiny. A strategy known as “trust stacking” has become increasingly common in Silicon Valley. This allows founders and investors to multiply their QSBS exclusions by transferring shares into multiple non-grantor trusts for family members, effectively creating multiple taxpayers and, with them, multiple exclusions.