QSBS — Section 1202 Gain Exclusion Planning
Section 1202 of the tax code allows eligible shareholders to exclude up to $10M of gain on qualified small business stock held more than five years. The exclusion is only available if the stock was issued correctly and the holding period is intact. The time to plan is before the clock starts — not after.
QSBS eligibility depends on the issuer meeting specific tests at the time of stock issuance — C-Corp status, gross assets under $50M, active business requirement. If those tests aren't met or documented, the exclusion disappears at exit with no way to recover it.
Most investors and employees don't know whether their startup equity qualifies for Section 1202 until after the exit — when it's too late to fix. The uncertainty is not a minor detail; it's a potential $10M difference.
It's wrong that one of the most valuable tax benefits available to startup builders goes unclaimed simply because no one documented the eligibility requirements when the stock was issued.
QSBS planning has to happen at issuance and be monitored through the five-year hold. Not at exit.
“You've spent years earning equity that could change your family's financial future — and the fact that you're not sure what to do with it doesn't mean you're not smart enough. It means nobody built you a clear map.”
The EQUITY System™ wasn't designed in a classroom — it was built working directly with engineers at unicorn startups and companies like Amazon, where the stakes of getting it wrong were real.
Mitchell Ludwig, CFP® built his practice around one problem: helping tech professionals turn equity compensation into lasting wealth. Every client relationship begins with equity — the strategy is built around it from day one.
Book Your Free Equity ReviewMost advisors see RSUs as income. I see them as a 3–5 year tax and diversification problem that needs a plan today.
The QSBS Planning Framework
We review the issuer's C-Corp status, gross asset test, active business requirement, and per-shareholder limits at the time of stock issuance. Early documentation prevents a disqualification that can't be fixed at exit.
The five-year holding period begins on the acquisition date. We map the clock alongside your liquidity event timeline, model the exclusion value at different exit scenarios, and identify any partial-year risks or gaps in the holding period.
The Section 1202 exclusion is per-taxpayer and per-issuer. With proper planning, multiple entities or family members can each claim up to $10M of exclusion on the same issuer's stock. We model stacking opportunities and coordinate with legal counsel before any transfer.
Schedule a free 30-min equity review — no commitment required.
Confirm QSBS eligibility and map the five-year holding clock.
Document eligibility, model stacking, and plan for exit.
Client Transformation
An issuer eligibility review completed at or before issuance — so the exclusion is confirmed before the clock starts.
Your five-year holding period mapped alongside your liquidity event timeline — with partial-year risks identified.
Coordination with legal counsel on eligibility documentation completed before any exit event — not at closing.
QSBS stacking opportunities across entities or family members modeled and documented before any transfer.
The founders and investors who claimed their full Section 1202 exclusion didn't rely on their attorney to catch it at closing. They built the plan at issuance.
Ready to Build Your Strategy?
No commitment. No generic advice. A clear picture of your equity position — and a tax strategy built around it.
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ExploreImportant disclosures
Mitchell Ludwig is a CERTIFIED FINANCIAL PLANNER™ professional and a Registered Investment Adviser Representative of Carolina Wealth Partners. Securities are offered through United Planners Financial Services, Member FINRA/SIPC. Carolina Wealth Partners and The Equity Architect are separate entities. Jon Ludwig is a Series 65–registered Investment Adviser Representative and promoter.
All content on this page is for informational and educational purposes only and does not constitute personalized investment, tax, or legal advice. Examples, illustrations, and client archetypes are composite in nature and do not represent any specific client. All tools and calculators are estimates only. Consult a qualified tax advisor or CFP® professional before making any financial decisions.
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Works exclusively with tech professionals and equity compensation