Section 1202 of the Internal Revenue Code, focusing on Qualified Small Business Companies (QSBs) and their Qualified Small Business Stock, holds the key to potential tax savings of up to $10 million in tax-free capital gains when structured correctly. While not every company qualifies, it’s crucial to consider this provision when buying or selling a business, as it can be a game-changer. Today, we unlock the immense potential it holds for prudent business owners seeking to navigate the complex realm of taxation and investment.

 

Show Notes

[01:16] Maximizing Tax Benefits: Grant starts off the conversation with exploring the potential of Section 1202 for small business owners

[03:56] Eligibility and Limitations: Grant explains the parameters of Section 1202

[08:05] Evolution of Exclusions: Grant dicusses the historical development of Section 1202

[09:54] Direct Acquisition and Compensation: Grant shares the requirements for tax-free capital gains

[12:21] Unlocking Growth Potential: Grant discusses harnessing Section 1202 for angel investors and employee incentives

[14:32] Maximizing Tax-Free Gains: Grant shares some limits and strategies under Section 1202

[16:50] Navigating Taxable Income: Grant shares some important considerations and strategies for Share-Based Compensation

[19:13] Tax-Free Growth: Grant explores opportunities for equity investments and future exits

 

Resources

Understanding the QSBS Tax Exemption: northerntrust.com/united-states/institute/articles/understanding-the-qsbs-tax-exemption

A Lavish Tax Dodge for the Ultrawealthy is Easily Multiplied: nytimes.com/2021/12/28/business/tax-break-qualified-small-business-stock.html

Qualified Small Business Stock (QSBS) Definition and Tax Benefits: investopedia.com/terms/q/qsbs-qualified-small-business-stock.asp