I’m an investor. Are my shares eligible for Qualified Small Business Stock (QSBS) benefits?
Investors’ shares may be eligible for QSBS treatment if applicable requirements are otherwise met (summaries of such requirements here).
With investors, a couple of important issues are worth noting:
QSBS tax benefits are only available to non-corporate holders. Thus, investors who are C corporations would not be eligible. Investors who invest through entities classified as partnerships for tax purposes can (to the extent that their owners are non-corporate holders) potentially qualify, but there certain additional requirements and some complex limits and interpretation issues involving partnerships.
QSBS tax benefits are only available for holders of “stock.” Thus, instruments such as convertible notes, warrants or SAFEs present uncertain interpretation issues (e.g., whether such instruments might validly be treated by the holders as “stock” for QSBS purposes).