IRC §1202 · 26 U.S.C. §1202
IRC §1202: Partial Exclusion for Qualified Small Business Stock
IRC §1202 excludes up to 100% of gain on qualified small business stock — C-corp shares held 5 years, $10M-or-10x-basis cap. OBBBA widened it further.
What it governs
- 100% exclusion for QSBS acquired after Sept. 27, 2010 and held 5 years
- Cap is the greater of $10 million or 10x the taxpayer’s basis
- C corporation with $50M-or-less gross assets at issuance; active business test
- OBBBA expanded QSBS — higher caps and shorter tiered holding periods
In the GuideFull treatment in Chapter 13 of the Guide (principal treatment) and Chapter 16 — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).
Related sectionsIRC §1014 — QSBS held to death steps up instead · IRC §199A — the pass-through counterpart to C-corp QSBS
From the practiceStart the consultation — Paul on video, one question at a time →
Questions this section answers
- What stock qualifies for §1202?
- Original-issue C-corp shares in a sub-$50M-gross-assets active business — services, banking, farming, and hosting businesses are excluded trades.
- How long must I hold QSBS?
- Five years for the full 100% exclusion at the classic tier; OBBBA added shorter tiered holds with partial exclusion.
- Does §1202 apply to S-corp stock?
- No — only C corporations. Converting to a C corp later doesn’t create QSBS; the clock starts at original C-corp issuance.
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The Guide treats 149 Code sections across 24 chapters — every claim verified against primary sources.
Get the Guide — $299