QSBS Eligibility Checker: Preliminary Section 1202 Screen

The exclusion is for noncorporate taxpayers. Pass-through ownership requires a separate analysis of the owner’s interest and holding period under §1202(g).

An LLC’s or S corporation’s own equity does not qualify merely because the business later becomes a C corporation.

Certain transfers preserve qualification or holding periods under §§1202(f), (h) and 1223. They require review; they are not automatic failures. Options and SAFEs require analysis of when stock is acquired. Services as an underwriter do not qualify.

The ceiling is $50 million for stock issued on or before July 4, 2025; $75 million for stock issued afterward, with inflation adjustments beginning in 2027. Test the statutory pre-issuance history, including predecessors, and immediately after issuance including its proceeds. Use cash plus adjusted bases of other property, with contributed property measured at fair market value and applicable controlled-group aggregation. This is not the company’s valuation or just its assets on the closing date. See §1202(d).

Generally, at least 80% of asset value must be used in qualified active businesses. Review excluded businesses, eligible-corporation status, subsidiary look-through, working-capital limits, portfolio securities and nonbusiness real estate. Passing at issuance alone is insufficient. Start-up and research activities can count without revenue.

Review purchases from you or related persons in the four-year period starting two years before issuance. Separately, review significant issuer repurchases in the two-year period starting one year before issuance: the statutory threshold exceeds 5% of the value of all stock at the start of that period. De minimis rules and exceptions can apply; a repurchase is not an automatic failure. See Treas. Reg. §1.1202-2.

Use the legally determined acquisition date after applicable holding-period rules, not automatically an option grant, SAFE purchase or transfer date. Unvested stock, 83(b) elections and transfers need separate review. The gross-assets ceiling above follows issuance; exclusion regimes follow acquisition.