The QSBS exemption, explained
Qualified small business stock is the largest single tax break available to startup shareholders — and it is entirely mechanical.
The requirements
Original issuance from a domestic C corporation, gross assets under the statutory threshold at issuance, an active qualified trade or business, and a five-year holding period.
The benefit
Exclusion of the greater of $10 million or 10x basis of eligible gain, with a tiered partial exclusion for shorter holding periods under recent rules.
Do this now
Exercising options starts the QSBS clock. Get written confirmation of QSBS status from the company at exercise; reconstructing it years later is painful.
This article is educational and not tax, legal, or financial advice. Talk to a CPA or tax advisor about your specific situation.