Podcast: Qualified Small Business Stock

The Alternative Edge

In this episode of Weaver: Beyond the Numbers, The Alternative Edge, hosts Blayne Lowary and Vardeep Mann delve into the intricacies of qualified small business stock (QSBS). This conversation provides crucial information for investors and fund managers looking to maximize tax benefits through QSBS. Lowary and Mann bring valuable insights into how QSBS can be a significant advantage for non-corporate taxpayers, providing significant exclusions on capital gains.

Key Points:

• QSBS can provide substantial tax exclusions, potentially excluding up to $40 million of gain from taxable income.
• Claiming QSBS benefits requires proper documentation and portfolio company representation.
• Investors should be aware of pitfalls like warehouse investments and subsequent closes, which may disqualify QSBS eligibility.

Lowary and Mann emphasize the importance of understanding QSBS eligibility criteria, including the need for proper documentation and portfolio company representations. “One of the requirements for stock to be eligible for QSBS is it has to be received upon original issuance,” Lowary said.

Additionally, the discussion covers critical gray areas, such as the impact of convertible notes and SAFEs on QSBS eligibility and the complexities surrounding carried interest. “Convertible notes and SAFEs are a gray area, specifically regarding when the clock starts for the five-year hold period,” Mann said.

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