QSBS Limits Raised

When I sold some shares in my company, it sure was nice to not pay any taxes thanks to QSBS. But it’s sort of an absurd handout to rich people — I have a hard time believing investment money would flee the US if early stage investors/founders had to pay long term cap gains on their first $10M of gains (after all, we’d still have carried interest to keep the VCs happy).

It’s also already really easy to multiply the limit, by gifting stock to your spouse, kids, or a trust — all of which can be done just before you sell and keep the benefit. So raising that limit just makes it more absurd.

Though, if you’re an employee at an early stage startup and you can afford it/stomach the risk, QSBS is a good reason to exercise your options early.

This applies per person. When startup founders realize their stock is actually worth a lot they form trusts and each one gets QSBS. Each trust must be to a different person.

I personally know people who stack 5-10 trusts for as many family members as they can. This appears to give them 50% more tax-free money (10 to 15 million) per person in their trusts.

Don't forget QSBS benefits for investors. The exclusion limit is 10x invstment. If you invested $20 million (in a startup valued under $50 million), you could exclude up to $200 million in capital gains. It has to be a person, not a corporation who invests. I believe this would apply to the VCs, since you are getting money from a partnership fund. I could be wrong though.

Man I wish Canada had this. Right now it's a 1mm-per-lifetime exemption. Giving up some ability to tax startup investors would be a small and worthwhile price to pay for encouraging more business formation.

Its funny. Generally, people in the startup world frowned on this bill because of the cuts to essential services. Nonetheless, we’re thrilled about the expansion of QSBS. Perhaps there’s always a silver lining.

So it applies to a situation when you hold stock of a company that's large enough to issue stock, but is, and has always been, small enough to never have more than $50M in assets, and you must hold the stock for at least 5 years.

How common is that?

Did this actually happen? My understanding is that this was in one version of the Senate bill but the final one has now passed and I’m seeing no mention of this anywhere which makes me assume it didn’t make the final version.

Interested to be proven wrong if someone has a link but unless they do this headline might be misleading.

'tight July 4 deadline (which is anticipated to slip further into the summer)'

Oops

This is such a stupid exemption. Most small businesses are not Delaware C corps, so they don't even qualify. Total handout to SV.