Section 1202 is the largest single exclusion in the Code for founders, early employees, and early investors. Planned early, it can eliminate federal tax on tens of millions of dollars of gain. Planned late, most of it is left on the table.
Qualified small business stock (QSBS) under Section 1202 excludes gain on the sale of qualifying C-corporation stock, subject to a per-issuer cap. For stock issued after July 4, 2025, the cap is the greater of $15M or 10x basis, with tiered exclusions of 50%, 75%, and 100% at three, four, and five-year holds. Stock issued earlier keeps the prior $10M or 10x cap and the five-year, 100% regime.
The cap applies per taxpayer, which is what makes planning valuable: additional taxpayers, typically non-grantor trusts, can each claim their own cap. And where a sale comes before the holding period is met, Section 1045 allows a rollover into new QSBS that preserves the clock.
Multiply the Section 1202 exclusion by gifting shares to non-grantor trusts, each with its own per-issuer cap.
Read the overview →Sold qualifying stock before the holding period was met? Roll the proceeds into new QSBS within 60 days and keep the clock running.
Read the overview →A separate taxpayer for income tax purposes. The building block behind QSBS stacking, state tax planning, and multi-generational compounding.
Read the overview →A first meeting covers your situation, the strategies that plausibly apply, and what we would need to review before recommending anything.
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