Turning Partnership and LLC Interests into Qualified Small Business Stock

This session covers the foundational requirements for Qualified Small Business Stock under Section 1202, including C Corporation status, original issuance rules, and the critical gross asset value test (now $75M post-OB3). Participants will learn about active business requirements, disqualified businesses, redemption rules, and best practices for maintaining audit-ready documentation throughout the holding period.

This session examines how to calculate the QSBS exclusion amount, including the base exclusion limits ($10M pre-OB3, $15M post-OB3) and the powerful 10x basis alternative. Attendees will explore exclusion percentages across different eras, the mechanics of multiple issuances, and how the new three-year and four-year holding periods under OB3 create partial exclusion opportunities with important planning considerations.

A brief intermission allowing participants to refresh before continuing with pass-through entity considerations. Use this time to review notes and prepare questions for the remaining sessions.

This session addresses the complexities of holding QSBS through partnerships and S Corporations, including partner-level determinations for the 10x basis calculation and timing requirements for partnership interest ownership. Key topics include carried interest treatment, permitted transfers such as gifts and death transfers, and critical prohibitions on contributing QSBS into partnerships.

This practical session explores common transaction structures including contributing QSBS to holding corporations, rollover structures, and partnership division pitfalls that can destroy QSBS status. Participants will learn strategies for converting LLCs into QSBS structures, including Section 351 considerations, liability issues under Section 357(c), and business purpose requirements under Section 269.