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QSBS (Qualified Small Business Stock)

Source: Investopedia
This Article has been Edited for Accessibility

QSBS (Qualified Small Business Stock)

What is 'QSBS (Qualified Small Business Stock)'

A qualified small business stock (QSBS) is simply the stock or share of a qualified small business (QSB). A qualified small business is defined as a domestic and active C-corporation whose gross assets (valued at original cost) do not exceed $50 million as of the date the stock was issued and immediately after issuance.

Explaining 'QSBS (Qualified Small Business Stock)'

A qualified small business stock (QSBS) is specifically any stock that was acquired from a qualified small business after August 10, 1993. In order for the investor to claim the stock as qualified for tax purposes, s/he must have acquired the stock at its original issue (not the secondary market) with cash or property or as payment for a service. Also, it’s not enough to just purchase or acquire the stock; the investor has to have held the stock for at least five years to reap the tax benefits of a QSBS.


Additional Resources

  1. Partial Exclusion For Gain From Certain Small Business Stock [law.cornell.edu]
  2. 26 Cfr 1.1202-2 [law.cornell.edu]
  3. Federal Tax Exclusion For Gains On Sales Of Stock Of Qualified Small ... [news.law.fordham.edu]
  4. Fordham Journal Of Corporate & Financial Law [ir.lawnet.fordham.edu]
  5. Small Business Tax Benefits: Overview And Economic Rationales [digital.library.unt.edu]
  6. Small Business Tax Benefits: Overview And Economic ... [digital.library.unt.edu]