Qualified Small Business Stock (QSBS) refers to stock in a qualified small business that has met certain requirements set forth by the Internal Revenue Service (IRS).
To be considered QSBS, the following criteria must be met:
The stock must be issued by a domestic C corporation.
The corporation must have less than $50 million in assets.
The stock must be acquired by the taxpayer at original issuance, either directly or through an underwriter.
The corporation must use at least 80% of its assets in the active conduct of one or more qualified trades or businesses.
It’s important to note that there are some limitations and restrictions to QSBS, including:
The exclusion is only available for stock held for more than five years.
The exclusion may be limited for corporations, depending on the size and type of the corporation.
QSBS must be designated as such by the corporation and the IRS before the exclusion can be claimed.
Exclusion of 100% of the gain from the sale of QSBS, up to $10 million or 10 times the taxpayer’s basis in the stock, whichever is greater.
The exclusion is available to both individuals and corporations, but there are some limitations for corporations.
