QSBS
QSBS refers to stock in a qualifying C-corporation that meets §1202 criteria. When held for at least five years, investors may exclude up to 100% of the federal capital gain from taxation — up to the greater of $15 million or 10x the investor’s adjusted basis. That exclusion is per taxpayer, per company. If the investor lives in a state that conforms to federal guidelines, they may eliminate state capital gains tax as well.
Criteria
ENTITY TYPE
Domestic C-Corporation
The issuing company must be a U.S. C-corp. LLCs, LPs, and S-corps do not qualify.
ASSET TEST
≤ $75M Gross Assets
Company’s aggregate gross assets must not have exceeded $75M at any time prior to, or immediately after, issuance.
ORIGINAL ISSUE STOCK
No Secondaries
Stock must be acquired directly from the company at original issuance.
QUALIFYING INDUSTRIES
— AND IMPORTANT EXCLUSIONS*
Generally Qualifying
- Technology
- Medical Devices
- Biotech
- Manufacturing
- Retail
- Wholesale
- Consumer Products
- Telecom
Excluded by Statute
- Financial services
- Professional Services (law, consulting, health)
- Hospitality/Restaurants
- Farming
- Mining
- Real Estate
THE EXCLUSION — HOW BIG IS THE BENEFIT?
50 - 100% tax exclusion up to $15M or 10x basis
Federal capital gains exclusion, on qualifying gains, of 50% after 3 years, 75% after 4 years, and 100% after 5 years. $15M per issuer exclusion cap (or 10x basis, whichever is greater).
WHY IT MATTERS FOR YOUR CLIENTS
For HNW clients — entrepreneurs, executives, founders, and inheritors with concentrated positions — capital gains taxes are often one of the largest drags on long-term wealth creation. QSBS offers one of the few remaining statutory mechanisms to reduce or eliminate that drag entirely on qualifying investments. It’s not a loophole; it’s a Congressional incentive to encourage capital formation in early-stage U.S. businesses.
The challenge: §1202 remains widely underutilized — fewer than 33,000 taxpayers per year claim the exclusion.¹ Across years of conversations with consultants, attorneys, wealth managers, and tax advisors, we have rarely encountered investment products designed to maximize the QSBS benefit by extending it past year five using §1045 rollovers — a gap our strategy is built to address.
FOUR COMMON QSBS MISUNDERSTANDINGS
“It stops at 5 years”
1045 rollovers can extend the benefit indefinitely past the 5-year hold.
“The lifetime cap is $15M total”
The $15M cap (or 10x basis) is per issuer — not per portfolio. Diversification multiplies the benefit.
“It’s only for angel investors”
Venture funds with QSBS flow-through can pass the benefit to LP investors.
“Alternative Minimum Tax (AMT) eliminates the benefit”
For stock acquired after Sept. 27, 2010, the 100% exclusion applies without AMT preference treatment.
A QSBS strategy that doesn't stop at year five
Since 2017, a differentiated private investment program built around §1202's gain exclusion — and enhanced by §1045 rollovers to compound capital beyond the traditional five-year horizon. Built for advisors whose HNW and UHNW clients need real tax alpha, not just attractive gross return.
59%
Tax efficiency is the #1 client investment challenge cited by RIAs.
KKR 2025 RIA Private Markets Survey
66%
Tax minimization is “very important” to HNW-focused practices.
Cerulli HNW Practices, 2025
37%
Entrepreneurs & business owners — the top client segment for UHNW practices.
Cerulli HNW & UHNW, 2025
THE EDGE MANY ADVISORS MISS
§1045 isn't a one-and-done… it can provide an evergreen compounding tool.
Many advisors understand the QSBS benefit at the 5-year mark. Used deliberately, §1045 lets QSBS gains roll forward beyond the 5-year mark into new qualifying companies — again and again — extending the tax-free compounding window without ever triggering capital gains. We've been executing this strategy since 2017.
HOW THE STRATEGY COMPOUNDS — A §1045 ROLLOVER CYCLE
01
Source & Invest
Diversified portfolio of QSBS-eligible companies, vetted for §1202 criteria and exit potential.
02
Early Liquidity Event
Portfolio company exits before 5-year hold — a common scenario in venture-stage investing.
03 • §1045
Roll Within 60 Days
Some, or all, or the proceeds can be redeployed into new QSBS-investments from our active pipeline. Holding period tacks on.
04
Compound & Exclude
Cycle repeats indefinitely. At exit (post-cumulative 5-year hold), gains qualify for §1202 exclusion — $15M or 10X basis per investment.
WHY U.S. BOSTON GROWTH CAPITAL
First §1045 rollover executed in 2017. Nearly a decade of operating experience inside the 60-day window — when most managers are still learning the rules.
Proprietary deal access. Open capital raises with QSBS-eligible companies in medical devices, biotech, telecommunications, and consumer products; a growing pipeline of new opportunities.
Proximity alpha. Northeast U.S. focus enables hands-on engagement with portfolio companies as a strategic partner — not just a check-writer.
Diversified rollover vehicle. Reduces single-name risk inherent in a do-it-yourself §1045 strategy.
WHAT YOUR PRACTICE GAINS
A genuine differentiator. Per CAIS-Mercer, 79% of advisors say private markets differentiate their practice; tax-advantaged private investing is rarer still.
An answer for liquidity events. Founders, executives, and inheritors with concentrated low-basis stock — the clients you're already trying to win.
Tax alpha that's hard to source. Up to 100% federal capital gains exclusion on qualifying gains — meaningful, defensible, and quantifiable.
A venture investments partner, not another platform. Direct access to our Portfolio Manager and the underlying companies.
Get in touch
Schedule a 30-minute conversation — and let's walk through the full deck together.