Does a stock purchase w QSBS preclude NewCo from QSBS?

searcher profile

May 12, 2021

by a searcher from Stanford University in San Diego, CA, USA

If I do a stock purchase of a company (and allow my seller to get QSBS), will that preclude my NewCo from qualifying for QSBS in the future upon my eventual exit?

I don't think the questions needs any further elaboration but am adding additional characters to meet the minimum character requirement here on SearchFunder.

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commentor profile
Reply by a professional
from Dartmouth College in Los Angeles, CA, USA
Definitely talk to a tax lawyer because I think there are a few issues you are likely to encounter. If you're asking about the shares of the operating company, I believe the shares have to be original issue shares from the company to qualify. If you're asking about the newco shares, there are requirements around being engaged in an active trade or business, so if it's a holdco i don't know if this will work. But these are all general principles and you have to talk to an expert, I wouldn't try and research it yourself.
commentor profile
Reply by an investor
from University of Pennsylvania in Washington, DC, USA
I like this site for QSBS questions and research- https://www.qsbsexpert.com/ . The key is making sure the new company qualifies for QSBS (C Corp, under $50M value, certain industries, etc) - if so, from my understanding it should still qualify but consult a tax attorney.
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