QSBS is the best tax break most founders never use.
Section 1202 lets you exclude gain on qualified small business stock, up to $15 million per taxpayer, or 10x your basis if that number is bigger. Hold the stock five years, sell, pay zero federal tax on the gain within that cap. OBBBA pushed the cap up from $10 million this July and softened the cliff too. Now three years gets you 50% exclusion, four years gets you 75%, five years gets you the full ride.
Here's the part almost nobody uses.
The cap is per taxpayer, not per company and not per family. A trust is its own taxpayer. So a founder holding stock worth $60 million doesn't have to sell it all under one $15 million umbrella. Gift shares into several separately drafted non-grantor trusts before the liquidity event, and each trust gets its own $15 million exclusion. Four trusts, four caps, potentially $60 million excluded instead of $15 million.
This isn't a loophole. It's built into the statute, and it's been used by sophisticated founders for years. But timing is everything. The gift has to happen before any sale is imminent enough to be recharacterized. Basis carries over from the original holder, so the earlier you plan this, the better it works. Wait until you're in a term sheet and it's too late.
If you're a founder sitting on appreciated stock and nobody has mentioned trust stacking to you, that's a conversation worth having now, not at closing.