Stock-level qualification, holder eligibility, holding period, the dollar limit, account ownership, and state treatment are separate determinations; this tool walks each one. Nothing is stored — not on a server, not on your device. Export the PDF before you close the tab; it is the only record.
One lot per analysis. Each issuance, vesting tranche, option exercise, conversion, gift, partnership distribution, and reorganization is a separate lot. Retain your support. Nothing is uploaded; each question lists the records that substantiate the answer — keep them with the exported PDF.
Nothing you enter is transmitted or saved. Closing or refreshing this tab clears every answer.
The exclusion percentage, holding period, and holder dollar limit turn on the date the holder is treated as acquiring the stock (after applying §1223 tacking). The issuer's gross-asset ceiling turns on the date the stock was issued. Assumes calendar-year taxpayers.
When did the company actually put these shares in your name? Check your stock certificate or the cap table.
The date the corporation actually issued these shares. For shares received on conversion, this is the conversion date. For a qualifying §1202(f) conversion of QSBS preferred, the gross-asset testing event is the preferred stock's original issuance (entered below) and the test is not rerun at conversion; otherwise this date is the gross-asset testing date.
Support: Stock certificate or ledger entry, stock purchase or subscription agreement, board consent approving the issuance.Usually the same date as above. Only different if you got the shares from someone else (a gift, an inheritance, a partnership) — then use the date they got them.
Required. Check the box if it equals the original issuance date. For stock received by gift, inheritance, or qualifying partnership distribution, or in a §1202(f) or (h)(4) exchange, use the tacked date. For option or warrant exercises, this is the exercise date — an option grant is not a transfer of stock (Reg. §§1.83-3(a)(2), 1.83-7(a)).
Support: Gift letter, estate or trust distribution records, partnership distribution statement, exercise notice, or exchange agreement.Did you originally hold a note, a SAFE, or preferred stock that later turned into these shares?
If the convertible instrument is respected as debt for federal income-tax purposes, it is not stock, and the §1202 stock-acquisition and gross-asset testing event ordinarily occurs when stock is issued on conversion. A SAFE or another hybrid instrument requires classification based on its terms. Convertible preferred that was itself QSBS tacks under §1202(f).
Support: The note, SAFE, or preferred stock terms; conversion notice; post-conversion stock ledger.The day the note, SAFE, or preferred became these shares.
The date the instrument converted into the shares in this lot. Ordinarily equals the legal issuance date above.
When was the preferred stock — the one that converted — first issued to you?
Used as the relevant original QSBS testing event: the gross-asset ceiling and the tacked acquisition date run from this date. The conversion shares' legal issuance date is preserved separately above.
Could the company have taken the shares back if you left early? If yes, did you file an 83(b) election within 30 days?
Without an 83(b) election, the holder's holding period begins at vesting, and each vesting date is a separate lot. Whether the corporation's §1202 issuance and gross-asset testing date also moves to vesting is not settled by controlling authority.
Support: Restricted stock purchase agreement, vesting schedule, stamped or mailed §83(b) election with proof of timely filing.How are you getting rid of the shares — selling for cash, a merger, the company buying them back, or something else?
§1202 applies to gain from a sale or exchange. Installment recognition spans tax years and dollar limits; a reorganization may carry QSBS status rather than trigger a taxable disposition.
Support: Sale, merger, or redemption agreement; closing statement; installment note; plan of reorganization.When the company buys your shares back, is it treated as a real sale (your ownership meaningfully drops) or as a dividend? Your advisor determines this.
Only a redemption satisfying §302(b) receives exchange treatment; otherwise it is a §301 distribution and does not produce the sale-or-exchange gain §1202(a)(1) requires.
What kind of entity is distributing the shares before they are sold?
When did you sell, or when do you expect to?
Support: Sale agreement, closing statement, or broker confirmation.Sale price minus what you paid (your basis), for these shares only.
Is any part of what you receive really wages, a dividend, or other ordinary income rather than profit on the shares? If unsure, say so.
Compensation recognized at vesting or exercise is generally a separate event and should be included in the stock's basis when appropriate. Special transactions — dividend-treated redemptions, §306 stock, reorganization boot — require allocation and technical review.
The dollar amount of that non-gain portion.
What you paid for the shares when they were first issued (or the value of what you contributed). Ignore anything added to basis later.
Enter the adjusted basis of this QSBS lot, determined under the applicable carryover, transfer, compensation, or exchange rules, but disregard additions to basis occurring after the stock's original issuance. If property other than cash was contributed for the stock, the holder's §1202 basis is not less than the property's fair market value at contribution.
Support: Payment records, contribution agreement and FMV appraisal, Form W-2 or 1099 for stock received for services, exercise notice and payment, transferor's basis records for carryover basis.Have you sold shares of this same company before and claimed QSBS? If so, the total gain you reported then — not just the part excluded. Zero if this is your first sale.
The flat dollar limit is reduced by eligible gain previously taken into account under §1202(a) — the full amount, not just the portion excluded. Include gain on 50% and 75% exclusion stock. Enter zero if this is the first disposition.
Support: Prior-year Forms 8949 and Schedules D reporting §1202 gain on this issuer.Are you also selling older shares of this company (acquired on or before July 4, 2025) this same year? Enter that gain; otherwise zero.
The $15 million limit for post–July 4, 2025 stock is also reduced by current-year eligible gain on the issuer's pre–July 5, 2025 stock. Enter zero if none.
In a past year, did your QSBS gain on this company's newer shares blow past the $15 million cap?
If so, the post-2025 flat dollar limit for later years is zero notwithstanding inflation adjustments. The 10× basis alternative is still evaluated.
Are you selling both older (pre-July 5, 2025) and newer shares of this company in the same year?
The statute provides separate flat dollar limits for the two classes with cross-reductions, but a single 10× basis alternative measured on the aggregate basis of the issuer's QSBS disposed of in the year. The interaction is not settled by published regulations.
The applicable entity perimeter depends on the test. For the gross-asset test, aggregate the issuer, its predecessors, and all corporations in the applicable more-than-50% parent-subsidiary controlled group (§1202(d)(3)). For the active-business test, apply the separate more-than-50%-owned subsidiary look-through rule (§1202(e)(5)(A), (C)); it does not look upward to a common parent or across to siblings. The redemption tests apply to purchases made directly or indirectly by the issuing corporation, including specified §304 transactions.
Was it a regular U.S. corporation (files Form 1120) the whole time — not an LLC taxed as a partnership, not an S corp?
An LLC taxed as a partnership does not qualify. Stock issued while the company was an S corporation does not qualify.
Support: Certificate of incorporation, Forms 1120 for each year of the holding period, any Form 2553 or 8832 history.Did the company start life as an LLC, partnership, or S corp before it became a C corp?
Support: Formation documents, conversion or incorporation agreements, S-election and termination correspondence, plan of reorganization.Were your shares created after the switch to C corp, or did you already hold them while it was an S corp?
Terminating an S election does not issue new stock. Existing S-corporation shares do not become originally issued C-corporation stock merely because the election terminates.
Aggregate gross assets means cash plus the adjusted tax basis of all other property, with contributed property counted at fair market value at contribution (§1202(d)(2)). Aggregate the issuer, every predecessor, and every corporation in the applicable more-than-50% parent-subsidiary controlled group — including a common parent and sibling corporations, not merely subsidiaries the issuer owns directly (§1202(d)(3)).
Right before your round closed, what was the total of the company's cash plus the tax basis of everything else it owned? Not the valuation — the balance sheet.
Support: Tax-basis balance sheet immediately before the issuance for the whole controlled group and predecessors; FMV support for contributed property. Form 1120 Schedule L is a starting point, not conclusive proof.The same figure right after the round closed, including the new money.
Include the cash raised in the round that issued these shares.
Support: Tax-basis balance sheet immediately after the closing; financing-closing records showing proceeds.At any point before your shares were issued, was the company ever over the limit — even briefly?
Once the ceiling is crossed, no stock issued afterward can qualify, even if assets later fall back below it. Year-end figures alone do not establish that the ceiling was never crossed.
Support: General-ledger detail; interim tax-basis balance sheets; acquisition and disposition records; financing-closing records; controlled-group and predecessor records; records of major property contributions and extraordinary transactions; Forms 1120 as a starting point.Read the guide: Does your company really pass the 80% test? →
Test the 80% requirement for each material period during the entire holding period. After the corporation has existed for at least two years, no more than 50% of total asset value may be treated as active solely under the working-capital rule (§1202(e)(6)). A more-than-50% subsidiary is looked through: the parent is treated as owning its ratable share of the subsidiary's assets and conducting its ratable share of the subsidiary's activities (§1202(e)(5)(A), (C)). Because "substantially all" is not a fixed percentage, a failed material period is routed to review rather than an automatic result.
Can you (or the company) provide balance-sheet figures for the years you held the stock? If not, choose No and this will be flagged for your advisor.
Support: Tax-basis and FMV balance sheets for each material period; fixed-asset, intangible, and investment schedules; business-activity records (revenue by line, contracts, headcount); working-capital budgets and board minutes supporting cash needs; real property schedules and leases; software license and royalty agreements.Did the company hold a lot of other companies' stock or securities as investments (not counting cash it needed to operate)?
An independent failure rule: exceeding this threshold means the corporation fails the active-business requirement for that period regardless of the 80% computation. Denominator is assets in excess of liabilities; §1202(e)(6) working-capital assets are excluded from the portfolio-stock category.
Support: Investment schedules and balance sheets for each material period.Did the company own real estate it wasn't using in its business — investment property, rentals, land held for sale?
An independent failure rule. Ownership of, dealing in, or renting real property is not itself active conduct; owner-occupied operating premises are not automatically bad assets.
Support: Real property schedules, leases, and balance sheets showing the use of each property.Does the company make a meaningful part of its money in any of these fields? Selling software to hospitals is not "health"; running a clinic is.
Checking a field does not by itself determine the result. Identify the activity, the periods involved, and the related asset value, and enter that value as excluded-activity assets in the 80% test above. "Principal asset" is a test only within the reputation-or-skill category.
Support: Business plan, revenue by service line, marketing materials, corporate tax return business-activity code, contracts.Almost always No for an operating startup. These are special-purpose tax entities.
Support: Corporate tax returns and elections filed.Almost always No. This is a specific SBA-licensed investment company type.
A specialized small business investment company is treated as meeting the active business requirement, but only during periods in which it so qualifies.
Both tests cover stock purchased directly or indirectly by the corporation, including transactions treated as redemptions under §304 (§1202(c)(3)(C)). Each path runs: purchase identified → de minimis test → regulatory-exception test → (for the company-wide rule) 5% test → result.
Did a sister company or affiliate buy the company's stock, or did stock get moved between related companies for cash?
Purchases by a related corporation, or transfers of the issuer's stock to a controlled corporation for property, can be treated as redemptions.
Support: Cap tables and transaction records for the issuer and related corporations.Did the company buy back any shares from you, your family, or entities you control in the two years before or after your shares were issued?
Support: Cap table and redemption ledger for the 4-year window, repurchase agreements, board consents.Was that buyback more than $10,000 AND more than 2% of what you and related people owned? Small buybacks don't count.
A purchase is disregarded unless it exceeds both thresholds.
Was the buyback because someone left the company, died, became disabled, or divorced? Those are the only exceptions.
Did the company buy back shares from anyone at all in the year before or after your issuance?
Support: Cap table and redemption ledger for the 2-year window; valuation support for aggregate stock value.Were those buybacks more than $10,000 AND more than 2% of all shares outstanding?
Setting aside buybacks for departures, death, disability, or divorce, did the rest add up to more than 5% of the company's total stock value?
Whose name is on the shares — you personally, a trust, your fund or LLC, or a retirement account?
C corporations cannot claim the exclusion. Partnerships, S corporations, RICs, and common trust funds are §1202(g) pass-through entities. Trusts and estates are not §1202(g) entities and are analyzed separately.
Support: Trust instrument, partnership or operating agreement, Schedules K-1, account statements.How will you file your personal return for the year you sell?
Married filing separately halves the flat dollar limit. For a joint return, eligible gain taken into account under §1202(a) is allocated equally between the spouses for purposes of tracking the per-issuer limit in later years.
Will the estate sell the shares, or will they be distributed to an heir who then sells?
The person (not the entity) who will actually report the gain on their return.
What kind of taxpayer is that person or entity?
When did that person become a partner, shareholder, or member of the entity?
Were they already an owner of the fund or LLC when it bought the QSBS?
Did they stay an owner the whole time, without dropping out and coming back?
What percent of the fund or LLC did they own on the day it bought the QSBS?
The benefit is limited to the interest held on the acquisition date.
What percent do they own now, at the sale?
Did their ownership share grow after the entity bought the QSBS? Only the original share qualifies.
Their slice of the total gain, using the percentage they owned on the acquisition date.
Their slice of what the entity paid for the shares.
Did you get the shares directly from the company (for cash, property, or work), or from someone else?
Stock bought from another shareholder on the secondary market is not QSBS.
Support: Stock purchase or subscription agreement with the corporation; option or warrant agreement and exercise notice; gift, estate, or partnership distribution documents; plan of reorganization.Did you earn the shares by working for this company (not as an investment banker placing its stock)?
Only stock received as compensation for services provided to the issuing corporation, other than underwriting services, satisfies this original-issue route.
Was the entity that handed you the shares a partnership? Distributions from S corps and trusts don't get the same treatment.
Distributions from an S corporation, RIC, common trust fund, estate, or trust do not use this branch.
Would the partnership itself have qualified for QSBS on these shares?
Were you already a partner when the partnership bought the shares?
Did you stay a partner from then until the shares were distributed to you?
Your ownership percentage in the partnership on the day it bought the shares.
Did the distribution follow the pass-through rules — no new partners cutting in, no increased shares? If unsure, say so.
Before the merger or exchange, were the old shares you gave up QSBS?
Was this a contribution to a new controlled company (§351) or a merger/reorganization (§368)? Your deal documents will say.
Did the deal actually qualify as tax-free under that section? Your tax advisor or deal counsel confirmed this at the time.
Confirm the transaction qualified under the cited section, including any continuity, business-purpose, and control requirements of that section.
After the deal, did the new company control the old one (80%+)?
Was the company whose shares you received small enough to qualify (under the gross-asset ceiling, active business) at the time of the deal? If not, only the gain built up before the deal can qualify.
If not, only gain accrued as of the exchange date (built-in gain) is treated as eligible gain on the replacement stock.
How much had your old shares gone up in value as of the deal date?
Have these shares been through a previous merger where the same cap applied?
Successive exchanges carry the earlier limitation forward.
Have you (or family or controlled entities) ever hedged this stock — shorted it, bought puts, or entered a collar? For most private-company holders the answer is No.
A short sale of substantially identical property, a put option on substantially identical property, or any transaction that substantially reduces the risk of loss. Positions held by related persons are attributed to the holder. The exclusion is denied unless the stock had already met the applicable holding period when the position was taken and the holder elects to recognize gain as if sold at fair market value on that date.
Support: Brokerage statements and derivative contracts for the holder and related persons.Per-issuer limit for the year of disposition: the greater of (a) the applicable flat dollar limit — $10 million for stock acquired on or before July 4, 2025; $15 million for stock acquired after, indexed for taxable years beginning after 2026 and rounded to the nearest $10,000 — reduced by eligible gain on the issuer's stock taken into account in prior years and, for the $15 million limit, by current-year eligible gain on the issuer's pre–July 5, 2025 stock; or (b) 10× the aggregate adjusted basis of the issuer's QSBS disposed of in the year. Married filing separately halves the flat limit. Apply the flat-limit rules separately to the pre- and post–July 4, 2025 acquisition classes with the required cross-reductions; the two classes do not create two independent exclusions.
Indexed amounts: the $15 million holder limit (§1202(b)(5)) and the $75 million issuer gross-asset ceiling (§1202(d)(4)) are separately adjusted for inflation for taxable years beginning after 2026. Until the IRS publishes a year's figures, this tool uses the base amounts and flags the result for confirmation.