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In this episode of his podcast, Roger Royse discusses the tax-planning strategy known as "QSBS Stacking" and warns that the IRS is increasingly viewing it as an abusive practice (0:02-0:16, 2:47-2:54).

What is QSBS Stacking?

Qualified Small Business Stock (QSBS) allows holders to exclude up to $15 million of capital gains (for stock acquired after July 2025) upon sale, provided specific holding period requirements are met (0:26-0:41, 2:08-2:13).

• The Strategy: Under IRC Section 1202(h), when QSBS is transferred via gift, the recipient "tacks on" the original holder's holding period and tax basis (0:55-1:13).
• Multiplying the Benefit: By gifting stock to multiple individuals (such as children) or non-grantor trusts, taxpayers create new, separate taxpayers. Each of these recipients is then entitled to their own separate $15 million exemption, effectively "stacking" the total tax exclusion (1:13-2:01).

Potential Regulatory Changes

While Congress expanded QSBS benefits recently, it did not take action to curb stacking (2:34-2:46). However, Roger Royse reports that a high-ranking Treasury official recently signaled that the government considers stacking an abusive "Silicon Valley tax shelter" and intends to address it through future regulations (2:21-2:34, 2:47-3:00).

Founders and investors are advised to stay tuned, as new guidance could significantly impact the viability of this strategy (2:56-3:04).

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Kim Le, Founder of A2Q2, helps tech leaders scale sales and finance systems with clarity and confidence. This episode discusses accounting and books for startups including best practices, common mistakes and war stories.

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