Founders, investors, and CFOs: when the IRS, an acquirer, or a transfer agent asks you to prove your Section 1202 exclusion, a one-page PDF on company letterhead isn't going to cut it. I write defensible attestation letters that hold up under audit and survive M&A diligence.
A note before you book: please share only the names of the parties and a brief, non-confidential description of your issue. Confidential details should wait until we’ve completed a conflicts check and signed a written engagement agreement.
What you get
A bespoke legal opinion letter that documents — share class by share class, tranche by tranche — that the stock satisfies every prong of IRC §1202:
- Issuer eligibility (domestic C-corp, gross assets test at issuance)
- Original issuance (money, property, or services — properly characterized)
- Active business requirement (80% test) with substantiation across the holding period
- Qualified trade or business analysis (industry-specific carve-outs addressed)
- Redemption and recapitalization analysis
- Holding period analysis (3/4/5-year tiers post-OBBBA, including the $75M gross-assets transition)
- Documentary record: cap table, board consents, financials, and Form 8949 alignment
The letter is built to be handed directly to an auditor, a buyer's tax counsel, or a §1045 rollover purchaser — without you having to translate it.
When you need one
| Situation | What I deliver |
|---|---|
| At issuance | Clean original-issuance letter — cheapest and strongest version |
| Annual refresh | Updated letter confirming the active business test stayed satisfied (recommended for portfolio companies) |
| Pre-sale / pre-rollover | Full-holding-period letter covering issuance through sale date — required by most acquirers |
| Retroactive | Reconstruction letter when documentation is scattered or the company is gone |
| Trust / gifting | Letter analyzing whether the §1202 cap survives stacking |
How I price it
Flat fees, quoted after the intro call — no hourly surprises. The right tier depends on when in the company's life you need the letter and how clean the record is:
- At-issuance letter — from $3,500. A clean original-issuance letter, written while the facts are fresh. The cheapest and strongest version, because nothing has to be reconstructed.
- Standard reasoned attestation letter — $7,500. A reasoned attorney opinion on the company's §1202 status as of a specified date — gross-assets test at issuance, active-business requirement, qualified trade or business, and any disqualifying events. Delivered in about 10 business days.
- Retroactive reconstruction — from $10,000. When the documentation is scattered or the company is gone, and the record has to be rebuilt before an audit notice arrives.
- Pre-exit comprehensive certification — from $15,000. Full-file review and a reasoned letter covering the entire holding period, for companies heading into a liquidity event without a clean QSBS paper trail. Audit-ready documentation in hand before the wires hit, not after.
Base pricing assumes up to 25 record holders. Larger cap tables: 26–50 holders +$1,500, 51–100 holders +$3,500, 100+ by quote. For founders, key executives, or major investors who want a holder-level letter confirming their own §1202 facts, I add per-shareholder companion letters at $500 each — most companies only need these for the people with the most at stake.
Need the letter refreshed every year with standing counsel between exits? That's an ongoing engagement rather than a one-time letter — see QSBS Sentinel, the annual §1202 attestation practice.
For context: Carta charges $2,500–$4,500 for software-generated letters and $12,000 for retroactive ones. My letters are individually drafted legal opinions, not templated — which matters when the facts are anything other than textbook.
Why founders and investors hire me for this
- 25+ years on §1202. I co-authored Angel Investing: Start to Finish (Holloway) and chair the Angel Capital Association's Legal Advisory Committee.
- LL.M. in Taxation (NYU). Tax-trained, not just corporate-trained — most startup lawyers can't say that.
- I write about this every week. The deep-dive guides on this site (what the letter needs to say, required or smart planning, the active business test after 5 years) are the same analysis I apply in every letter.
- Post-OBBBA fluency. The 2025 changes to §1202 (tiered holding periods, $75M asset test, expanded exclusion cap) reset the analysis. I track the changes and the state conformity in real time.
Process
- 20-minute intro call. I scope the situation and quote a flat fee.
- Document request. Cap table, charter, financials at issuance and annually, board consents, any prior tax positions.
- Draft in 2–3 weeks. Faster on rush.
- Final letter + supporting memo. Yours to hand to auditors, buyers, or the IRS.
FAQ
Is an attestation letter legally required?
No. §1202 itself doesn't require one. But the IRS, acquirers, and §1045 rollover buyers will all ask for substantiation — and the time to build the record is before they ask, not after. (Full analysis here.)
How much does a QSBS attestation letter cost?
Most engagements fall in the $3,500–$15,000 range, depending on company complexity, number of tranches, and how much documentation already exists. Retroactive reconstructions and pre-sale letters are at the higher end. (See pricing detail above.)
Can my CPA write it?
A good CPA can document the financial facts, but the §1202 legal conclusions — qualified trade or business analysis, redemption rules, recapitalization treatment — are legal opinions. Auditors and buyers want them signed by tax counsel.
What if the company has been sold or wound down?
I do retroactive letters. They're harder and more expensive, but better than nothing when an audit notice arrives.
Do you work with companies outside Washington?
Yes. §1202 is federal. I write letters for companies and shareholders nationwide.
Book a 20-minute call → | wallin@carneylaw.com