An investor’s or company’s QSBS qualification is not determined by one individual or a group of individuals stock; therefore, the company has non-QSBS and QSBS. There could be multiple investors whose stock does not qualify but have one investor that does. There are some circumstances if the company had stock redemptions from a related party of a QSBS holder than the stock would be ineligible for that holder or if the company had stock redemptions over a de minimis amount than all of the company’s stock issued within a two year time period would not qualify.

Below are some examples of stock not qualifying for QSBS and having no affect on current QSBS holders.

  • An investor purchases shares in the company on a secondary market, disqualifying the stock for QSBS.
  • The company issues new stock after going over $50M in aggregate gross assets, disqualifying the stock for QSBS.
  • An investor transfers his shares to a family partnership, disqualifying the stock for QSBS.
  • A C Corporation buys newly issued stock in the company, disqualifying the stock for QSBS.

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