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.