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The Opinionated Daily of Technology & Code
GARRY'S TAKE
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| Tuesday, March 3, 2026 · Action Brief |
ACTION BRIEF |
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DO THIS NOW
Preserve Your QSBS Eligibility Before Series A
By Garry Sandcastle
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THE ACTION
Document your C-corp's aggregate gross assets at tax basis -- today.
Deadline: Before your next priced round closes
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WHY THIS MATTERS
Section 1202 lets you exclude up to $10M in capital gains from federal tax when you sell qualified C-corp stock held 5+ years. But the gross assets test is point-in-time at each stock issuance. If your Series A pushes assets over $50M at the moment of issuance, those new shares fail QSBS. Your existing shares are safe, but you need documentation.
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HOW TO DO IT
Pull your balance sheet. Sum: cash + adjusted tax basis of all other property (not fair market value). If this number is comfortably under $50M, you are in good shape. Save a dated snapshot. Ask your accountant to memo the calculation. Repeat at every future issuance event. If you are close to the threshold, consider the 2025 OBBBA rules ($75M for post-July-4-2025 issuances) and discuss timing with counsel.
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CAVEAT
California does not conform to Section 1202. State gains are fully taxable at up to 13.3% regardless. This action preserves your federal benefit only. For state planning, talk to a tax attorney about domicile and sourcing rules.
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