Find answers to your questions below.
Q: I acquired my QSBS shares through stock options. Is the acquisition date measured as of the grant date or the exercise date?
A: Acquisition date measures the date you took ownership of the shares. In the case of stock options, this is the exercise date.
Q: I have seen conflicting information as to whether QSBS gains that exceed the $10MM/10x basis limit are subject to a 28% rate or the regular capital gains rate. What’s the right answer, and where is your citation?
A: Gains in excess of the limit are taxed as regular capital gains. Title 26 Section 1(h)(7) makes it clear that the 28% rate gain only applies to the amount that would be excluded under section 1202 if it weren’t for the percentage limitation. This reading is also confirmed in the “28% Rate Gain Worksheet” in the instructions for Schedule D.
Q: What happens to my QSBS shares if my company is bought out?
A: Let’s assume your current shares will be converted into stock of the new company. Under 1202(f), as long as your current shares are QSBS, your new shares shall be treated as QSBS as well. In addition, the new stock shall be treated as having been held during the period during which the old QSBS shares were held.
Our Special Situations page covers this scenario in more detail
Q: I sold part of my QSBS shares last year and claimed a capital gain exclusion of $6MM. If I sell a similar amount this year, what will my exclusion be?
A: Assuming your cost basis is low, your exclusion will be $4MM. Here’s how it works:
- In any given year, you can exclude up to 10x cost basis with no limit.
- If your gain is greater than 10x the cost basis, you get a $10MM lifetime limit on that stock.
- Since $6MM was used last year, you can claim an exclusion of $4MM this year.