I just got home from the Heckerling Institute on Estate Planning.
It’s one of those conferences where you leave with a notebook full of ideas and a short list of things that really matter.
One topic stood out more than the rest.
QSBS.
Also known as Section 1202.
If you’re a business owner, this is worth a few minutes of your time.
The Simple Version
There may be a way for business owners to sell stock in their company and pay little to no federal capital gains tax on some or all of the gain.
In the right situation, the exclusion can be up to 100%, capped at the greater of:
$10 million, or
10x your original investment
That’s real money.
And for many owners, it’s money they didn’t even know might be on the table.
Why This Came Up at Heckerling
At Heckerling, the conversation wasn’t about “cute tax tricks.”
It was about how often QSBS is missed, misunderstood, or discovered too late.
Most business owners don’t wake up thinking about Section 1202.
They’re focused on growth, customers, employees, and eventually… an exit.
The problem is this:
QSBS planning often has to happen years before the exit.
Sometimes right at formation.
Sometimes before a recap.
Sometimes before gifting shares or moving ownership into trusts.
Once the wrong step is taken, the opportunity may be gone.
Who This Applies To (High Level)
QSBS can apply if:
Your company is a C corporation
It operates an active business (not investment or professional services)
Gross assets were $50 million or less at the time the stock was issued
The stock was acquired directly from the company
The shares are held for at least five years
That’s the short version.
The real analysis is more nuanced.
And that nuance is exactly where things break.
Where Advisors See Problems
Here’s what we see in the real world:
Owners convert to a C-corp without thinking about QSBS
Shares are gifted to trusts without understanding holding period rules
Trust structures are used that accidentally limit or destroy the exclusion
QSBS is discovered after a letter of intent is signed
At that point, there’s often nothing left to fix.
That’s frustrating for owners.
And avoidable with earlier conversations.
Why I’m Writing This Now
Coming back from Heckerling, I felt the need to say this out loud:
If you own a growing business — or plan to sell one someday — you should at least ask the QSBS question.
You don’t need to become an expert.
You don’t need to change anything today.
But you should know whether this applies to you, or could apply to you with the right planning.
Sometimes the answer is “no.”
Sometimes it’s “not yet.”
And sometimes it’s “this could materially change your outcome.”
Final Thought
Big exits don’t happen overnight.
They’re built over years.
The best tax outcomes usually are too.
If you’re a business owner and QSBS has never come up in a serious way, that’s the conversation worth starting — before you’re negotiating a deal, not after.
If this is something you want to explore, I’m happy to talk it through with you and your other advisors.
And if it’s not a fit, at least you’ll know.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.