QSBS Stacking

The Section 1202 exclusion caps out per taxpayer, per issuer: the greater of $15M or 10x basis for stock issued after July 4, 2025, and $10M or 10x basis for earlier stock. Stacking means creating additional taxpayers. A founder gifts qualifying shares to one or more non-grantor trusts, typically for children or other family members. Each properly structured trust is a separate taxpayer with its own full cap, and gifted shares carry the original holding period and QSBS character with them.

A concrete example

A founder holds post-2025 stock with an expected $60M gain at exit. Alone, $15M is excluded and roughly $45M is taxed. Gift portions to three non-grantor trusts before the exit and, done correctly, the family unit can shelter up to $60M across four caps. At a 23.8% federal rate the difference is roughly $10.7M of federal tax.

Where stacking fails

• Grantor trust status. If the trust is a grantor trust for income tax purposes, it is not a separate taxpayer and adds no cap.
• Gift tax cost. Gifts consume lifetime exemption at the value on the date of the gift, which is why stacking is dramatically cheaper done early, before a term sheet exists.
• Step-transaction risk. Gifts made on the eve of a signed deal invite scrutiny. Timing and documentation matter.
• State nonconformity. California and a handful of other states do not conform to Section 1202. Trust situs planning can address state exposure, but it has to be deliberate.

Our role

We size the stack against your realistic exit range, weigh exemption use against your broader estate plan, and coordinate trust counsel so the structures hold up. This is a strategy where a year of lead time is worth seven figures.