Surgent's New and Expanded Tax Benefits Associated with Section 1202 – Qualified Small Business Stock

This program reviews and analyzes the important changes made by the One Big Beautiful Bill Act (OBBBA) to qualified small business stock (QSBS) covered under Section 1202. Effective for stock issued after July 4, 2025, there are important changes that make Section 1202 much more appealing to clients willing to run the risks associated with doing business as a C corporation. These enhanced provisions could potentially lead to exclusion of capital gains if very strict compliance rules are followed. Section 1202 application is particularly attractive for start-ups and entrepreneurial endeavors. For taxpayers willing to confront the technical challenges of this provision, Section 1202 may produce impressive tax advantages.

Accounting and finance professionals needing to understand the changes brought about to QSBS by OBBBA and particularly those professionals with clients owning Section 1202 stock or who are considering acquiring Section 1202 stock

• Be well informed about OBBBA’s enhancements to QSBS

• The graduated holding periods and the related graduated capital gain exclusions
• Raising the per-issuer gain exclusion cap to $15 million
• Raising the corporate-level aggregate gross asset threshold to $75 million
• Qualifications for a corporation to issue Section 1202 stock
• Using multiple non-grantor trusts to unlock the $15 million exclusion cap
• The 10% test associated with non-operating real estate and investment securities
• The 50% working capital test
• The 80% test relative to an active qualified trade or business
• QSBS attestation letter
• Excluded businesses
• Permissible businesses, including manufacturing, retailing, technology, and wholesaling
• How Section 1202 applies in the context of a transfer to other taxpayers

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