Part of our Flip-Up Guide — Open the guide →
Qualified Small Business Stock (QSBS) is the US federal tax incentive under IRC §1202 that lets non-corporate shareholders exclude capital gain on the sale of stock in a qualifying C-corporation. The core requirements: the stock must be acquired at original issuance (not bought from another holder), the issuer must be a domestic C-corp running an active qualified business, and the company’s aggregate gross assets must not exceed the statutory ceiling when the stock is issued.
The One Big Beautiful Bill Act reshaped the regime for stock issued after July 4, 2025: the gross-assets ceiling rose from $50M to $75M (inflation-indexed), the per-issuer exclusion cap rose from $10M (or 10x basis) to $15M (indexed from 2027), and the old five-year cliff became a tiered schedule — 50% exclusion after three years, 75% after four, 100% after five, with the non-excluded portion of partial exclusions taxed at the 28% §1202 rate plus 3.8% NIIT. Stock acquired on or before July 4, 2025 keeps the old rules ($50M / $10M / five-year cliff).
Why it matters in Turkish flip-ups
QSBS benefits US taxpayers — citizens, green-card holders, US-resident founders and US funds’ taxable partners; a founder taxed only in Türkiye gets nothing from §1202 directly. It still matters in every Delaware flip-up, for two reasons. First, US investors price it: a clean QSBS profile makes the company more attractive to angels and funds whose partners can each exclude up to $15M. Second, structuring decides eligibility: whether holdco shares received in the share-for-share exchange qualify, and from when the holding period runs, depends on how the flip is executed — facts that cannot be repaired afterwards. QSBS analysis belongs in the flip planning memo, with US tax counsel, not in the exit data room.
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