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Frequently Asked Questions

What happens if I need to sell my Qualified Small Business Stock (QSBS) before having held it for more than five years?

Generally, holders of shares that would otherwise be eligible for QSBS cannot take advantage of the tax benefits if they have not met the five-year holding requirement.

However, there are two important exceptions to this rule:

  • If you have held the shares for more than six months prior to sale and use the consideration from selling the shares to purchase other QSBS stock within 60 days of the sale, your new shares may be able to qualify for the QSBS benefits after five years have passed from the issuance of the original QSBS stock.
  • In certain tax-free transactions, you can exchange your QSBS for shares of another corporation and receive full or partial QSBS treatment on the new shares. 

In both of the above scenarios, you may combine the holding periods from the original shares and the new shares in order to meet the five-year holding requirement.  Please note that there are exceptions and nuances to both of the transactions described above.  

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