[HN Gopher] QSBS Limits Raised
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QSBS Limits Raised
Author : tomasreimers
Score : 47 points
Date : 2025-07-05 11:14 UTC (11 hours ago)
(HTM) web link (www.mintz.com)
(TXT) w3m dump (www.mintz.com)
| readthenotes1 wrote:
| 'tight July 4 deadline (which is anticipated to slip further into
| the summer)'
|
| Oops
| nine_k wrote:
| 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?
| MarkMarine wrote:
| Real Assets != valuation. How much in assets do you think the
| average tech startup holds?
| misiti3780 wrote:
| I think a lot of founders dont know about it.
| underyx wrote:
| This also applies for options exercised before the company
| reaches $50M in assets. And then the gain from a valuation from
| $50M to say $1B is all excluded.
| jusob wrote:
| Not just exercised, but bought before the company reaches
| $50M in assets.
| intuitionist wrote:
| IANAL but I believe the option has to be exercised before
| the company reaches $50M in assets--that's when you buy the
| stock.
| jandrewrogers wrote:
| The requirement was only that you acquired the stock when the
| company has less than $50M (now $75M) in assets. If the company
| now has $1B in assets, you still get the tax exclusion up to
| the limit on stock that was purchased back when the company was
| small.
|
| It specifically advantages investment in small companies that
| then turn into large companies.
| toast0 wrote:
| Fairly common for startups that go through multiple rounds of
| funding.
|
| 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.
| awithrow wrote:
| A company doesn't need to be large to issue stock. Stock was
| issued to all the founders as part of incorporating our
| company. More stock was issued when we raised money.
| mitchellh wrote:
| For any startup that actually reaches a sizable liquidity event
| of any form, it's very common.
|
| 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.
| mikeocool wrote:
| 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.
| jedberg wrote:
| It is certainly a handout to rich people, but it does serve a
| purpose. If you have a choice to invest in a startup vs a more
| stable investment, the $10M (or now $15M) in tax free gains is
| a strong incentive to choose the startup investment over
| something else.
|
| 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.
| jimhi wrote:
| 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.
| jimhi wrote:
| I actually just wrote about this in more detail last week:
| https://mrsteinberg.com/how-to-not-pay-your-taxes-legally-ap...
| g42gregory wrote:
| 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.
| mehulashah wrote:
| 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.
| Aurornis wrote:
| You will never find a large bill like this that is all good or
| all bad.
|
| 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.
| gkedzierski wrote:
| Section 174 being revoked (for US based R&D) is probably an
| even larger immediate benefit.
| nceqs3 wrote:
| This is such a stupid exemption. Most small businesses are not
| Delaware C corps, so they don't even qualify. Total handout to
| SV.
| CPLX wrote:
| 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.
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