Federal Tax Exemption • IRC § 1202
IRC § 1202 QSBS Tax Exemption Checker
Section 1202 of the Internal Revenue Code allows founders, early employees, and angel investors in qualifying Delaware C-Corporations to exclude 100% of federal capital gains taxes (up to $10M or 10x basis) upon exit.
100% Federal Capital Gains Exclusion (Institutional QSBS)
Estimated Federal Tax Savings Upon Exit
$1,190,000.00 USD(20% LTCG + 3.8% NIIT Eliminated)
Congratulations! Your stock meets all IRC § 1202 requirements. You can legally exclude 100% of your federal capital gains up to $10M (or 10x basis), and your gain is 100% exempt from the 3.8% Net Investment Income Tax (NIIT) and Alternative Minimum Tax (AMT).
Statutory 5-Year Holding Period:5.2 / 5.0 Years
Statutory QSBS Eligibility Questionnaire
Verify the 6 statutory conditions required by IRC § 1202 to confirm your stock qualifies.
IRC § 1202(c)(1) strictly requires a domestic US C-Corporation.
IRC § 1202(d): Cash + property tax basis must not have exceeded $50M immediately after issuance.
IRC § 1202(c)(1)(B): Secondary market share purchases do NOT qualify.
IRC § 1202(e)(3) statutorily excludes professional services, finance, and hospitality.
0 Yrs2.5 Yrs5 Yrs (Exclusion Unlocks)10 Yrs
Statutory cap is greater of $10,000,000 or 10x basis per taxpayer per issuer.
Recommended QSBS Substantiation Steps
Document balance sheet gross assets at issuance in your corporate minute book to prove <$50M ceiling.
Obtain a formal QSBS Officer Attestation Letter signed by the corporate Secretary/CFO.
Maintain continuous C-Corporation status (do not elect S-Corp status, which voids QSBS).
Confirm all SAFE and convertible note conversions are clearly timestamped in your cap table.