Any individual owning stock purchased or received directly from the company could potentially be eligible for the QSBS capital gains tax exclusion or the Section 1045 gain rollover if the QSBS standards as per IRC Section 1202 were met.
Below are a few details that may be helpful in beginning to assess if stock meets the QSBS criteria:
Corporation: Compass, Inc.
Description: Compass is a real estate technology company that provides an online platform for buying, renting, and selling real estate assets, leveraging AI within its processes.
Entity Type: Incorporated in 2012. Note, the Company needs to have been a C-Corp or taxed as a C-Corp when your shares were issued to be considered a qualified legal entity for QSBS purposes.
Exemption Level: Since the shares were issued after September 2010, all shares would likely be eligible for up to a 100% tax exclusion if the other QSBS criteria are met.
Gross Assets: Exactly when the Company surpassed the $50 million gross asset test needs to be determined, however the Company’s first single financing over $50 million was on September 15, 2015; therefore, it is likely the case that stock issued on and after this date would not be eligible for the QSBS exemption.
In order to assess whether stock issued previously may qualify, the Company would also have to have not taken actions that invalidate QSBS status such as a certain level of redemptions, and would have to satisfy the active business requirement.
If you think your shares may qualify, please contact us to evaluate your potential QSBS eligibility.
For further details on QSBS considerations in IPOs please refer to the following case study.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.