With the 2025 tax reform officially supercharging Qualified Small Business Stock (QSBS), founders and investors now have a golden window to build generational wealth — tax-free.
If you’re holding early-stage stock in a C-Corp, especially if it qualifies as QSBS under the new law, now is the time to think long-term: Who else in your family should hold some of this tax-free rocket fuel?
The Play: Gift QSBS Early. Stack the Exclusions. Build a Dynasty.
The updated law (Section 1202, post-OBBB) lets each taxpayer exclude up to $15 million in QSBS gains per company, indexed for inflation. That means:
You get $15M
Your spouse gets $15M
Your kids each get $15M
Your irrevocable grantor trusts each get $15M
…all with the same stock.
Gifting QSBS Transfers the Holding Period, Not the Cap
Here's the kicker: when you gift QSBS, the holding period carries over to the recipient (e.g., your child, spouse, or trust)… but they get their own lifetime $15M gain exclusion.
So if you’ve held the stock for 2 years, and you gift it to your 18-year-old daughter today, she only has to wait another 3 years to unlock the 50% exclusion at 3 years, 75% at 4, or 100% at 5 — and she gets her own $15M exclusion on that same company.
Build the Stack: Family + Trusts = Mega Exclusions
Let’s say you’re the founder of a fast-growing tech startup and your QSBS is currently worth $1/share.
If you gift 2M shares now (FMV = $2M) to each of the following:
Your spouse
Two kids
Two intentionally defective grantor trusts (IDGTs)
They each get their own $15M cap, plus your holding period. If the company exits at $10/share, the $20M gain in each account could be 100% tax-free.
That’s $120 million in tax-free gains, legally — just by planning ahead.
Add Valuation Discounts for Gifting Efficiency
When gifting to family or trusts:
Use valuation discounts (e.g., lack of marketability or minority interest) to reduce gift tax exposure
File a protective Form 709 gift tax return to lock in the valuation
This allows you to transfer more equity with less estate/gift tax impact, while preserving the QSBS status.
Sample Scenario
Emma, a startup founder, owns 5M QSBS shares currently worth $1M (pre-raise).
She gifts:
1M shares to her spouse
500k each to two kids
1M each to two IDGTs
Her holding period is 2 years.
Total tax-free gain: $45M+
(Far more if value grows and they hold longer)
Timing Matters
To qualify for the new $15M cap and accelerated timeline (3–5 years), you must acquire the stock after the law’s enactment (2025).
Already have older QSBS? You still get the original $10M exclusion — but that’s stackable too.
Bottom Line
This strategy is a powerful combo of:
QSBS gain exclusion
Gift and estate tax planning
Family wealth transfer
Startup equity optimization
It’s one of the most efficient, legal, and future-focused tax plays available right now.
Want to Run the Numbers?
We help founders:
Audit their cap tables for QSBS eligibility
Structure gifts to family and trusts
Coordinate with legal and valuation teams
File the right forms to preserve benefits
Let’s talk about how your equity today can unlock tax-free wealth for generations.