How common is that?
It specifically advantages investment in small companies that then turn into large companies.
it's that ever part that the GP got confused about. the company assets have to have never exceeded $50M before you acquire the stock, not just at the time you acquire it.
If you invest during a seed round, chances are the funding is much less than $50M. Series A usually is much less than $50M too. Series B or C might put you over the limit, depending... but that doesn't disqualify the earlier purchases.
Meeting the holding period could be easy or hard, depending on what the company does. If it takes 5+ years between when it hits the $50M limit and when the shares are marketable, most holders will have a qualified disposition. If it's acquired and the merger terms aren't well tax managed, that may be a disposition for all holders and that sets the holding period. If it becomes marketable quickly, then some holders are likely to sell at least some shares before meeting the holding period... Avoiding capital gains tax is nice, but not nice enough to forgo realizing gains when experience has shown that stock prices can drop rapidly for a variety of reasons that may be hard to forsee.
As background: I cofounded a startup that made a lot of people millionaires. QSBS really helped a lot of people. Yeah, if you're going to make deca-millions anyways then it seems like a handout, but if you're "only" making a few million dollars it's the difference between retiring and not.
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.
And at the end of the day, small businesses usually drive the most innovation, so getting rich people to direct their money into startups instead of big companies is good for the country as a whole.
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.
There are so many provisions that you should have mixed opinions about them. The evaluation of the bill as a whole should be whether or not the tradeoffs are reasonable.
Interested to be proven wrong if someone has a link but unless they do this headline might be misleading.
> Sec. 70431. Expansion of qualified small business stock gain exclusion.
readthenotes1•7mo ago
Oops