1202 is a little know or understood provision of the Internal Revenue Code that excludes the greater of (1) $10M or (2) ten times basis in original issue stock. To qualify for 1202, the company must be a C corporation and have aggregate assets of $50M or less at stock issuance. The investor must acquire shares in the original stock issuance. The company must be engaged in an active trade or business. The stock (QSBS) must be held for at least five years.
In addition, if you want to sell your QSBS before five years, 1045 allows you to rollover your QSBS into replacement QSBS.
There are a lot of complexities not mentioned in this post. Contact me to learn more.
