QSBS: A Powerful Tool, but Documentation is Key

Summary

As we face increased pressures and uncertainty in today's economy, it is critical that taxpayers focus on maximizing tax efficiencies to minimize income taxes and preserve cash flow. The qualified small business stock (QSBS) provision under Sec. 1202 of the Internal Revenue Code is one of the most powerful opportunities to reduce or eliminate taxable gain in a sale transaction. However, taxpayers need to pay particular attention to some of the foot-faults that can invalidate QSBS status and be mindful of a renewed and increased focus by IRS on this gain-exclusion provision. Proper documentation and technical analysis are important to ensuring that your QSBS position can withstand an IRS challenge upon audit.