qualified small business stock

Definition

IRS tax designation (Section 1202) that can exclude up to $10 million in gains from federal taxes for early startup investors, assuming you navigate the Byzantine requirements. The tax break that makes angel investing slightly less insane.

Example Usage

We structured the investment to qualify for QSBS treatment, potentially saving millions in capital gains taxes if the company succeeds.

Origin

Created by U.S. Congress in 1993 to incentivize small business investment

Fun Fact

QSBS requires holding shares for five years and the company maintaining less than $50M in assets, among other requirements many startups accidentally violate.

Source: U.S. tax code and venture capital terminology

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