QSBS (Qualified Small Business Stock)

QSBS (qualified small business stock) is stock that meets the conditions of Internal Revenue Code Section 1202, which may let an eligible noncorporate taxpayer exclude part or all of the qualifying federal gain. The rules depend on the stock’s acquisition date, original issuance, the company’s business and gross assets, the holding period, and your circumstances. For qualifying stock acquired after July 4, 2025, the potential exclusion is 50% after at least three years, 75% after four, and 100% after five, and the gross-assets threshold rose to $75 million. The per-issuer gain limit is generally the greater of $15 million (subject to applicable adjustments) or ten times the adjusted basis, with different rules for older stock. As a venture fund LP, you don’t automatically qualify for the exclusion when the fund sells a company.

Example: Before relying on QSBS treatment for a fund distribution, ask a qualified tax adviser whether the stock, the fund, and your LP interest meet the applicable rules.