QSBS is popping up more and more these days, whether in M&A transactions, IPOs, regulatory changes, politics, entrepreneurship and in many more areas. Here are some of the recent developments we are following.
Tax Court Ruling (Ju v. United States) Shows When Claiming QSBS, Documentation is Key (4/8/2024) - A recent U.S. Court of Federal Claims decision, Ju v. United States, has highlighted the importance of meticulous recordkeeping for taxpayers seeking to exclude capital gains from the sale of qualified small business stock (QSB) under Section 1202. Section 1202 offers a significant tax exclusion to incentivize innovation: shareholders who hold QSB stock for more… Read More
Sweetening VC Secondaries with QSBS (3/5/2024) - In December 2023, the Venture Capital Journal examined whether 2024 would be the year of VC secondaries. A confluence of factors makes the timing ripe for such deals, and the expected deal activity is already panning out. Secondary transactions are typically transacted at discounts to the fair market value, however the up to 100% capital… Read More
IRS Halts PLRs on “Active Business” Requirement for QSBS (2/4/2024) - IRC Section 1202 offers little guidance as to what is meant by certain excluded trades or businesses outlined in Section 1202(e) - such as “health services”, “consulting”, “engineering”, etc. As such, shareholders wondering whether the company they hold stock in is in a Qualified Trade have sought clarification from the IRS. The IRS has issued… Read More
IRS Ruling Opens Doors for Service Businesses: Navigating the IRC Section 1202 Gain Exclusion (1/28/2024) - A recent IRS Private Letter Ruling found that a company providing interim staffing and executive search services was engaged in a qualified trade or business and, therefore, eligible for IRC Section 1202 gain exclusion. The ruling, PLR 202352009, stated that the Company, a C corporation that provided interim staffing services and executive searching for its… Read More
R&E (Section 174) Capitalization Relief Could Unearth QSBS Potential (1/24/2024) - The proposed reversal of R&D capitalization under IRC Section 174 offers a QSBS lifeline to shareholders in companies that may have crossed the $50M threshold due to R&E capitalization. Read More
IRS Rules Interim Staffing and Executive Search Company QSBS Eligible: What You Need to Know (1/2/2024) - On December 29, 2023, the IRS released a Private Letter Ruling, addressing whether a corporation that provides interim staffing and executive search services meets the Section 1202 / QSBS criteria of being a “Qualified Trade or Business.” Read More
Unraveling the QSBS Maze: An Interactive Guide to Qualified Trades (12/31/2023) - Shareholders in certain companies have requested clarification, for which the IRS issued Private Letter Rulings (PLRs) to clarify if their companies are indeed operating in Qualified Trades for QSBS purposes. The Interactive Guide to Qualified Trades or Businesses for QSBS Qualification is an online resource curated by Hanson Bridgett LLP, offering a comprehensive summary of… Read More
IRS Drafts New K-1 Reporting Requirements for QSBS (1202 and 1045): What Partnerships Need to Know (12/20/2023) - On November 17, 2023, the IRS released proposed modifications to Schedule K-1 introducing fundamental changes in how partnerships and their investors report Qualified Small Business Stock (QSBS) gains. Read More
Wisconsin Adopts QSBS! (11/15/2023) - You may have noticed some more blue on our state QSBS map. As of October 25, 2023, Wisconsin allows for the full QSBS exclusion! Governor Tony Evers signed Assembly Bill 406 which modified Wisconsin's conformity to Federal QSBS, retroactive to QSBS gains realized after December 31, 2018. See the Governor's office press release here. Prior… Read More The Exclusion of Consulting Firms from QSBS Eligibility: Determining True “Consulting” Status and the Broader Implications (7/12/2023) - According to the Internal Revenue Code Section 1202 (I.R.C. §1202), investors can benefit from a substantial tax advantage through Qualified Small Business Stock (QSBS). Under this section, a complete exemption from federal capital gains taxes on profits gained from the sale of QSBS stock held for a minimum of five years is possible. However, it… Read MoreGet in Touch
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.