A company confirmation letter helps document issuer-level facts supporting a Section 1202 position. Use this template as a starting point, adapt it to the shares and periods being reviewed, and retain the records supporting each statement.
What to substantiate before signing
Review and supplement the letter as needed to address the following. An officer should confirm only facts the company can support and identify missing records, assumptions, and periods not covered.
C-corporation status. Document that the issuer was a domestic C corporation for federal tax purposes at issuance and during substantially all of the relevant holding period. State-law incorporation alone does not establish federal C-corporation tax status.
Gross-assets test. Document the issuer’s and any predecessor’s statutory pre-issuance asset history and the immediately-after-issuance calculation, including issuance proceeds and required controlled-group aggregation. The applicable ceiling is $50 million for stock issued on or before July 4, 2025 and $75 million for later issuances, with indexing after 2026. Assets must not exceed the applicable ceiling. Measure cash plus adjusted tax bases of other property, applying the special fair-market-value rule for contributed property; company valuation and book assets are not substitutes.
Original issuance. Identify the shares, recipient, issuance date, consideration, and supporting approvals and stock documents. An ordinary secondary purchase does not qualify. A gift, inheritance, conversion, or exchange requires analysis of the applicable exception and the chain of ownership.
Active business and qualified activities. Document the company’s activities and whether at least 80% of its assets by value were used in qualified active businesses during substantially all of the relevant holding period. Apply the excluded-business, working-capital, subsidiary, portfolio-stock, and real-estate rules. A statement about what the company does today does not establish historical compliance.
Redemptions. Review both corporate purchases from the shareholder or related persons during the four-year period beginning two years before issuance and significant company-wide redemptions during the two-year period beginning one year before issuance. Apply the respective thresholds and regulatory exceptions; a statement limited to significant redemptions does not cover both tests.
These requirements are addressed in Section 1202(c)–(e) and Treasury Regulation §1.1202-2.
What the letter does not establish
A company letter does not determine every shareholder’s eligibility, acquisition date, holding period, available gain limit, or state tax treatment. An at-issuance letter cannot establish future active-business compliance or resolve redemption windows that remain open. Supplement the record as the holding period and relevant events develop.
Section 1202 does not require an attestation letter or prescribe an annual letter. The letter supports a tax position; it does not replace the underlying evidence or guarantee an exclusion.
Who it's for
Founders, employees, investors, and the companies issuing their stock. A CFO or CEO can complete factual statements the company can substantiate, with tax counsel addressing legal conclusions and unresolved questions.
For an analysis of specified shares and periods supported by company records, see QSBS attestation services.