What Do You Mean Tax Free? Qualified Small Business Stock

 

In this episode of the NASPP Equity Expert Podcast, we are joined by Jonathan Fish, the CEO and co-founder of Cap Gains. Jonathan brings his extensive experience as a CPA and public accountant, focusing primarily on venture funds and private equity funds. He shares insights into the world of Qualified Small Business Stock (QSBS), a powerful tax incentive that can offer 100% capital gains tax savings.

The key points of this episode include:

• Introduction to QSBS
  • Understanding QSBS and its benefits
  • Historical context and changes over time
  • Importance for venture funds, entrepreneurs, and early employees
    
• Corporate and Shareholder Level Requirements
  • Requirements at the corporate level, such as being taxed as a C Corp and having less than $50 million in gross assets
  • Shareholder requirements, including original issuance of stock and a five-year holding period
  • Common pitfalls and misconceptions around QSBS eligibility
• Navigating QSBS Regulations and IRS Audits
  • The role of private letter rulings from the IRS in determining qualified trades or businesses
  • Potential complications from actions like stock redemptions, S elections, and exceeding asset thresholds
  • Recent changes in tax legislation affecting QSBS, such as the capitalization of R&D expenses
• Market Trends and Awareness
  • The impact of market liquidity and legislative changes on the popularity and understanding of QSBS
  • Strategies for maintaining eligibility and maximizing benefits, including the Section 1045 rollover provision for gains reinvestment

Additional Resources:

• Founders, Unlock Big Tax Savings with Qualified Small Business Stock (QSBS)