The QSBS corporation cannot make any stock redemptions / purchases from the investor or anyone related to the investor, under the meaning of section 267(b) or 707(b), within a four year period starting two years before the issuance of the QSBS and two years after the issuance or the investors stock will be disqualified. There are some exceptions to the above rule if (i) the purchase is a de minimis amount ($10,000 or >2% of the taxpayer/corporation), (ii) repurchases of stock from services, or (iii) stock repurchases after the death of the QSBS holder.
If the QSBS corporation has stock redemptions / purchases that exceed 5% of the value of all of the corporations stock within a two-year period beginning one-year before and after the issuance of the QSB stock all of the corporations stock will be disqualified for QSBS.
Also, a corporation cannot make any distributions in redemption of stock under section 304(a) within a four-year time period, beginning two-years before and after the issuance of QSB stock.
There are some cases where a corporation can repurchase its own stock without the repurchase being considered a stock redemption.
What is a distribution in redemption of stock under section 304(a)?
When is a corporations stock purchase of its own shares not considered a stock redemption?