Practical legal guidance on QSBS (Section 1202), equity compensation, startup formation, financing, and Washington State tax issues for founders, investors, and startup employees.
Section 1202 uses tax basis for the company's qualification cap and FMV for the shareholder's exclusion cap. Confusing the two costs founders money. The distinction, cleanly.
Angels investing on SAFEs are the most QSBS-exposed investors on the cap table and the least protected. A one-page side letter with an annual certification fixes it.
The NVCA venture forms address Section 1202 at closing and then go silent. Several core QSBS requirements are continuous tests, not issuance tests. The forms should require an annual certification.
For Washington founders, §1202 is the single most valuable tax provision in the federal code. Here's how to qualify, document, and defend the exclusion across both pre- and post-OBBA regimes.
Treasury Assistant Secretary for Tax Policy Kenneth Kies signaled this week that Treasury is working on guidance to address QSBS trust stacking. Here's what founders should do now.
